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Thursday, March 29, 2012 02:55 am

Don’t let Springfield be Harrisburg, Pa.

Harrisburg, Pa., and Springfield have some interesting and frightening parallels. Like Springfield, Harrisburg is the capital city and the county seat. The city has a population of nearly 50,000 with a three-county regional agricultural area of approximately 500,000. Like Springfield, Harrisburg highlights its significance in American history and its economy is heavily reliant on government. Harrisburg also shares with Springfield a major public infrastructure project originally unveiled as a long-term economic engine. But something went terribly wrong in Harrisburg and the city is in a free-fall.

It began when the city decided to retrofit its existing waste-to-energy resource recovery facility (incinerator) that burns garbage and uses the heat released to generate electricity. Environmental problems and continued failures to meet federal regulations dogged the facility from its start, ultimately causing a shutdown by federal regulators in 2003. Owing $104 million but needing the plants’ critical revenues, the city decided to invest more to upgrade the facility. In 2004, $120 million in new debt was issued to retrofit and expand the facility.

A series of failures by the contracted construction company set Harrisburg’s nightmare scenario in motion. Vicious political battles, lawsuits, service reductions, tax increases, forensic audits, state receivership, bankruptcy filings, charges of gross mismanagement and calls for federal investigations have engulfed the city since. This month the city defaulted on general obligation bonds after several past revenue bond defaults and the city budget is still in the red by $5 million. Springfield should pay attention to Harrisburg’s plight.

Two months ago, City Water, Light and Power’s top managers delivered some sobering news to the city council. They explained that, despite numerous attempts to manage declining revenues, the power plant was facing major problems and urgent action was needed to avoid defaulting on its bond covenants. CWLP recommended a 9.5 percent rate increase to stop the bleeding. The council rejected the recommendation outright and told CWLP to return with other options.

The council seemed shocked and angered by these developments and weeks of intense public discussion followed. Responding to calls from some aldermen to present a plan with no rate increases, CWLP outlined a series of unimaginable cuts. Four aldermen responded with an alternative, proposing a three-year “share the pain” plan that reduced the size of the originally proposed rate increase and added cost-cutting measures. Ultimately, an amended version with a two-year rate increase plus cuts was approved.

Disaster averted, the issue has quickly faded into old news. But Mayor Mike Houston and CWLP directors insist that problems still loom. They say the original 9.5 percent plan was designed only to divert a crisis, not solve the problem. But, like in Harrisburg, it appears that the council and the mayor are poised for an ongoing battle.

Today’s political and policy narratives are monopolized by calls for the downsizing of government. It is clear that the public has no appetite for tax or rate increases and that trust in government is dangerously low. The result is a hard-line posture that cutting government spending is the only way to make things right, even when the consequences are dire.

What’s missing are cooler heads seeking balanced approaches. I do not believe that CWLP should be rewarded with a “no questions asked” rate increase that keeps business operating as usual. But neither should street-level workers bear the brunt of decades of bloated management, political hiring and faulty decision-making. Nor should city residents be subject to dramatic service cuts that jeopardize their safety and well-being and cause preventable future costs.

The compromise plan passed by the council has bought some time. Now the community must confront the problem with the goal of finding a balanced, rational and equitable solution. We must reject the knee-jerk and narrow-minded response of one alderman who swore his allegiance to the ratepayers of Springfield and not the “bondholders in New York.” The sentiment is understandable and appealing, but policy approaches that derive from it will be dangerous and irresponsible.

Just google “Harrisburg debt” to see why.

Sheila Stocks-Smith is a special projects consultant and adjunct professor at UIS, teaching a class on public policy.
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