Capitol recap: Lawmakers say one change could push languishing bill to prevent municipal crises akin to Harrisburg

     Downtown Harrisburg and the State Capitol.  (Lindsay Lazarski/WHYY)

    Downtown Harrisburg and the State Capitol. (Lindsay Lazarski/WHYY)

     Legislation introduced in May 2013 still hasn’t made it to floor vote.

    Harrisburg’s near-bankruptcy inspired lawmakers to introduce bills aimed at preventing other municipalities from suffering similar problems.

    One is now law.

    Another package of bills would increase state oversight of municipal debt and accountability for those responsible for incurring it on behalf of taxpayers.

    The measures were reintroduced in February, after never making it a floor vote during past sessions.

    Supporters say they’ve changed an element in one, in particular, they think will yield a different outcome. It’s about how cities get the state’s permission to borrow money.

    Here’s how it works now:

    If municipalities want to borrow more than $125,000 or 30 percent of their debt limit (whichever is greater), they need approval from the state Department of Community Economic Development.  DCED has 20 days to make a decision, with potential for another 20-day extension.

    But municipalities often don’t submit anything to DCED until after they’ve passed an ordinance authorizing a bond sale. While the transaction isn’t completely final at that stage, it’s on its way and typically gets there within a few weeks. So 40 days isn’t enough time. And 20 days isn’t either, probably.

    During Senate hearings in 2012, officials testified to the need for a more thorough process. Harrisburg’s first receiver David Unkovic noted, in particular, that the state’s review should happen before an ordinance goes through.  So lawmakers first proposed increasing the review window to 60 days, with an extension possible.

    Local government officials complained the review window was too long, risking a rise in interest rates that make a deal cost-prohibitive, according to sponsor state Sen. John Eichelberger, R-Blair. So the latest version of the measure – Senate Bill 340 – adds a 10-day cursory review window when DCED presumably would look for major red flags or missing information for bond issues over $250,000.

    This measure is just one of five. Two others address interest-rate swaps. One targets municipal authority spending and the fifth makes it absolutely clear public projects need a performance bond (Harrisburg’s financial problems were exacerbated by lack thereof for the city’s incinerator retrofit responsible for the bulk of the city’s debt).

    But as Harrisburg’s state Sen. Rob Teplitz pointed out last week, legislative measures aimed at prevention and better oversight going forward are as critical as the accountability started with the charges announced against former Mayor Stephen Reed.

    “The citizens of Harrisburg, the residents and taxpayers here and elsewhere on the hook to pay for this mess, deserve answers,” said Teplitz, D-Dauphin. “

    Editor’s note: This post was updated to clarify the purpose of the proposed additional 10-day review window.

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