AP News

Harrisburg receiver takes tax fight to Pa. court

HARRISBURG, Pa. (AP) — Lawyers for the state and Pennsylvania's debt-strapped capital squared off in court Thursday over the thorny issue of whether a judge can force a city to raise taxes.

Commonwealth Court Judge Bonnie Brigance Leadbetter did not rule immediately after listening to six hours of arguments on whether to order Harrisburg's City Council to double the rate of the city's 1 percent earned income tax, as sought by appointees of Gov. Tom Corbett.

But, she said, if she does order the tax increase, she would restrict the money to paying for crucial city services amid a looming cash shortfall and insist that none of it go toward payments on the massive and controversial debt tied to the city's municipal trash incinerator.

State officials said they know of no other time in Pennsylvania when a judge has ordered a municipality to raise taxes, and the state constitution seems to protect a municipality's power over its own taxes, saying the Legislature may not "delegate" that authority elsewhere.

For Harrisburg's City Council, the resistance to approving the tax increase is part of a larger fight over whether the city of 50,000 should alone have to repay the incinerator debt, which has dragged it to the brink of bankruptcy.

Lawyers for Harrisburg's City Council told Leadbetter that the city would have more alternatives to resolve the shortfall if Corbett's appointees were not pushing to offload city assets to pay down an incinerator debt that they say was accumulated illegally.

Besides, City Council's lawyers said, the law that authorized the state's unprecedented takeover of Harrisburg does not take away the city's power over its own taxes and a separate state law already caps the city's earned income tax at 1 percent.

The state takeover law, signed in October by Corbett, says neither the state-appointed receiver nor the receiver's recovery plan is authorized to "unilaterally levy taxes."

But Leadbetter suggested that the legal and constitutional prohibitions on ordering a municipal tax increase are not absolute, and the lawyer for the state's receiver, Mark Kaufman, told Leadbetter that the city has lost the power to call its own shots by virtue of having triggered the state's takeover by rejecting a previous recovery plan from state consultants.

Kaufman also argued that the incinerator's creditors are unlikely to agree to any concessions if the city has not increased taxes.

The state's takeover was spurred by suburban Harrisburg lawmakers who were concerned that city officials would ask a court to slap a tax on commuters or seek bankruptcy protection in an effort to force creditors, including Dauphin County, to assume part of the debt.

Corbett's first appointed receiver resigned on March 30 after asking state and federal prosecutors to look into an auditor's January report on the financing of the incinerator's retrofit. The audit's authors said that, in some cases, city and county officials took "strained positions" on state municipal debt financing law to allow the retrofit to proceed.

Harrisburg is burdened by a number of financial problems, but the debt left over from the costly retrofit of its municipal trash incinerator is the most pressing. The city and the city authority that owns the incinerator are tens of millions of dollars behind in payments on the approximately $330 million in debt tied to it, and city officials have not developed a plan to repay it.

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