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Plan released to keep Harrisburg, Pennsylvania, from bankruptcy filing

By Leigh Remizowski, CNN
  • State unveils a financial plan that would freeze wages and cut jobs in Harrisburg
  • Report calls for the sale of city's trash plant
  • Many cities report similar financial woes, need for cutbacks

(CNN) -- In an attempt to rescue Harrisburg from bankruptcy, the state released a financial recovery plan on Monday that would consolidate government offices and services, freeze wages and sell a trash plant that has left the city millions of dollars in debt.

The state commissioned the report after Pennsylvania's capital city was designated in December as "financially distressed" under Act 47, which allows cities to get the help of the state Department of Community and Economic Development.

Harrisburg was operating on a deficit of more than $2 million in 2010, the report said. It estimates that number will increase by $3.4 million this year, leaving the city unable to pay its bills or city employees by the fourth quarter of 2011.

In addition to freezing wages, the recovery plan could eliminate up to 62 jobs in an attempt to downsize city agencies. The report calls for the mayor's office and the city council to share some office personnel and for the elimination of the city's park ranger program. It could also eliminate 12 employees in the fire bureau and up to 27 in the police bureau.

The plan also calls for an increase in property and income taxes "only when absolutely necessary to close any remaining gaps between revenues and expenditures."

Harrisburg is not the only city facing financial woes. According to a 2010 report released by the National League of Cities, nine in 10 city finance officers report declining revenues and spending cutbacks in the wake of the recession.

"We're seeing public safety cuts all across the country," said Gregory Minchak, a spokesman for the organization. Also hard-hit are infrastructure projects, city staffing and health care costs.

Camden, New Jersey, is a stark example of these cutbacks. In January, the city laid off 168 police officers and 67 firefighters in the name of reducing costs and closing a $26.5 million budget gap. The city has since hired back 50 police officers.

"(Cities) are showing leadership and they're making those difficult decisions that have to be made," Minchak said.

But Minchak warned against pegging Harrisburg's situation as indicative of the state of other cities in financial trouble.

"It's kind of a unique situation," he said. "Their troubles stem from the incinerator situation. It's not necessarily representative of other cities in the nation."

Authors of the report want the Harrisburg Resource Recovery Facility -- a trash plant -- to be sold. The city owes $220 million in principal bonds on the plant.

"While the structural deficit alone creates a critical situation in a matter of months, the debt associated with the Harrisburg Resource Recover Facility could, by the stroke of a judge's pen, force the City to file for Chapter 9," the report said.

In September, Harrisburg was in danger of defaulting on a $3.29 million payment on the bonds it issued to buy the Resource Recovery Facility before the state offered its capital city a $4.3 million cash injection.

A public forum will be held on the plan in Harrisburg on June 28. Officials will have a chance to revise the plan before the Harrisburg City Council votes on it, according to a statement from the state Department of Community and Economic Development.

Harrisburg Mayor Linda Thompson said in a statement that she plans on meeting with the city council to iron out any discrepancies and to "assure equitable distribution of the economic challenges involved," she said.

"There is no silver bullet in this plan, but I'm hoping city council will work with the mayor and staff to reach an agreed plan of action in the best interests of the city and the region," she added.