(I met up with Brad Koplinski, one of the good guys on Harrisburg City Council who’s now running to be the Democratic nominee for Lieutenant Governor, to do this interview back in April. I’ve been sitting on it until people started tuning into this race a bit more, and this seemed like a good week to push it out there. Brad and I wonk deep on the Harrisburg incinerator political fight, infrastructure and pensions, distressed cities and regionalism, Marcellus Shale and taxes, and tax-exempt properties and PILOTs. So pull up a tab – this is extremely long, but highly worthwhile for anyone interested in municipal issues in PA. You will learn way more than you ever thought you wanted to know about what the Lieutenant Governor does.)
Jon Geeting: We see a lot of finger-pointing at the city of Harrisburg for the incinerator mess and the city’s fiscal distress. But doesn’t Dauphin County also share responsibility?
Brad Koplinski: The county – every county in the state- has to have a trash plan, a disposal plan for all the trash in the county. Well we had a dump, a landfill, in our county and the trucks who went to this landfill happened to go through the nicest neighborhoods in the county. They didn’t want stinky trash trucks going through their nice neighborhoods. And so the dump was full, they wanted to expand and people said no, so the county said, what are we going to do with our trash? And so they bought into the city’s plan to retrofit the incinerator. (And coincidentally, then, all the stinky trash trucks go through the [pause] worst neighborhoods in the county. So we have some environmental justice issues there as well.)
So the county bought into the city’s retrofit of the incinerator. The Harrisburg Authority was the original bond issuer. There was some concern, and there should’ve been concern, that this was not revolving debt. This was not debt that was sustainable. If you build a parking garage, ok people are going to park here, you’re going to make money, and you’re going to pay off your loan. Everything had to work perfectly – perfectly – for the incinerator to even think about paying itself off. They said that it was like revolving debt. They said that it would pay for itself. They wrote papers to the state, because every city has a debt limit, of course, and said “hey, don’t count this against our city’s debt limit.” And the state saw the signature of the former Mayor and others and they said “ok” and they rubber-stamped it.
So what role does the state actually have in following up to make sure that something is self-liquidating debt? So they fudged that, and while the Authority was the initial bond issuer and was going to pay back the debt, the city co-signed for all of the debt, and the secondary co-signer was in many cases the county of Dauphin, and another was AGM, the insurance company. So the incinerator never paid for itself, it does make money – about $8-9 million a year – but the debt service is $15-16 million a year.
JG: So the question becomes, who should take the haircut?
BK: Right, so the Authority knew it wouldn’t be able to pay for itself so they tell us – we get a letter every 6 months or so saying “yeah, we can’t pay the debt – sorry” and then the city sends a letter saying “yeah, we can’t pay the debt – sorry” and it goes down to the county, it goes to the insurance companies, depending on who the holder of the bond is. And they’re mad at us, obviously, and they want to sue us for all the money we owe them. And that was one of the good things about the bankruptcy option – again, last resort, don’t get me wrong – but it freezes every one of the lawsuits that’s currently out there. It says to everybody, you know, chill, let’s take a seat around the table…
JG: Coordinate some more realistic arrangement…
BK: Absolutely. In the end, they hired a company to retrofit the incinerator, it was untested technology, borrowed about $170 million for it originally, they ran out of money, they skipped town, they filed for bankruptcy and the technology didn’t work. So we were left holding the bag. And what are you going to do? You’re going to have a broken incinerator? No, you’ve gotta fix it. And so now there’s $75 million or so that went to Covanta Energy who did a great job getting the incinerator up and running, it’s state of the art now, works at 97-98% capacity, which is great. But it’s getting to that point – various sundry lawsuits here, bankers fees and lawyers fees there, and it all adds up to about $350 million.
And every time we tried to do something different or innovative or take a serious look at bankruptcy, Corbett and the legislature – and specifically Senator Jeff Piccola who is Harrisburg’s Senator said “no, you guys can’t do that.” We’re going to put a bankruptcy ban on you, which has now been expired thankfully partially because our receiver has said, I need this option to hang over these creditors’ heads to say, listen guys – you need to get on board with our plan, or else.
Which is exactly what we were doing in Harrisburg – we came to them and said, listen – we’re filing for bankruptcy, give us $100 million bucks off the top, that’s your haircut, because we were looking at what was happening in Jefferson County, Alabama. They have a $3.2 billion sewer problem. Many entities, including the state, and including AGM insurance, gave them $1 billion off of their debt. They said don’t file bankruptcy guys, we’ll give you a billion bucks, we’ll take a billion dollar haircut. That was a third! We wanted a third.
JG: Damn right.
BK: Made sense to us – lop $100 million off, we’ll work on this. We don’t want to be irresponsible. We’ll sell the incinerator. We’ll lease our garages. We realize that’s our buy-in. And that’s the thing that I always put in there because when it came to the taxes that they later pushed on us, our argument was that this is our buy-in. Selling our assets for $225-250 million, that’s the city’s buy-in.
JG: Right, that’s a big concession for the city. You were also going through the Act 47 process.
BK: Yes, the incinerator problem was growing and growing and growing, there was pressure on our former Mayor Reed to file for Act 47, and he didn’t want to do it. I think probably because that would have uncovered the financial house of cards that he had built up. We got a new Mayor – Mayor Thompson – she wanted Act 47, she applied for it. We had feared that it was just going to be a cookie-cutter plan that was not going to solve our problems. That is was not meant for problems like Harrisburg’s. And we’re finding out more and more that it’s not meant for the problems of many of our cities. It’s antiquated – it hasn’t been changed or modified since 86-87 when it first went through. So it’s a cookie-cutter plan that doesn’t address the real problems, especially not Harrisburg’s problems. And we started to push back on that.
When we got the plan – first of all the DCED was not even adhering to their own administrative regulations as to how to have the hearing and go through the process for approval. They were just talking to the cities and the cities were rubber-stamping it. They didn’t have hearings, they didn’t have anything. We were the first city to hold them to having a hearing in front of the public and explaining what they wanted to do. It was unbelievable. And they were pissed at us! And they didn’t even consider all the revenue options – they didn’t consider sales tax. They said, well you can’t get a sales tax passed through the legislature, so why are we even going to put it on the list of options? That pissed me off.
JG: That is ridiculous. So many people unthinkingly blame cities for their problems, without understanding how much state law constrains municipalities’ options. The municipal toolkit needs a bigger shake-up than state legislators are willing to consider. There need to be more options available than are currently considered politically palatable.
BK: And they kept cutting off more and more of our options. So we pushed back and said no to the Act 47 plan, and if you vote no first, they give you another chance a couple weeks later. And then we said no to that. And then the Mayor has an opportunity to make a plan. We said no to her plan. I don’t think she actually ran her plan for a vote the second time. I don’t think she was legally mandated to. But not only would’t it have worked, it would have left us $26 million in stranded debt. We said no – we’re not selling all our stuff and still letting Wall Street get paid off completely. Instituting a tax increase, selling all of our stuff, and we’ve still got $26 million in stranded debt?
JG: Politically that’s just not going to fly with the voters
BK: No, and we’ve got a 32% poverty rate in the city. So they said all right we’re going to put a receiver on you guys. So we fought that. We fought the receiver on principle, but now it’s actually gotten to the point where I agree with the receiver’s plan now only because he’s been able to work outside of the constructs of Act 47. He’s not in the Act 47 box. So he can do things that may actually work now.
JG: Can you elaborate on that a bit? What do you think cities should have the option to do when they become fiscally distressed?
BK: There are some revenue options that you’ve gotta have. Any time you want to raise a different kind of revenue besides property taxes or earned income tax rates you’ve gotta go beg the Governor. I don’t care who the Governor is – you’ve gotta go beg the Governor and the legislature for it, and unless you’re Philadelphia or Allegheny County – or unless the situation is so dire, like in Scranton potentially – they’re going to say no. Because they don’t want their fingerprints on raising taxes, or finding new ways to raise revenue.
Corbett won’t raise taxes himself, but he’ll tell school boards, he’ll tell city councils, he’ll tell county commissioners to do it.
JG: The Republicans are kicking the tax increases down to local governments.
BK: Yeah, pushing it onto them. So I was talking to the Mayor of Bloomsburg and he’s got senior citizens getting thrown out of their homes, because of increasing property tax rates, yet he’s got 4000 students running around drinking and having a good time. He’d love to have a drink tax. It would go to infrastructure, it would go to cops and the fire department, which would help protect the kids in turn. The evidence on the drink tax shows it has not increased the price of the drinks. In Allegheny County bar owners haven’t really increased the price of the drinks because that’s going to hurt business. They’ve absorbed that cost. But they’ve still paid it, and it’s gone to the municipal coffers. We’ve got to have different ways that revenue can be raised by the municipalities without having to beg the state legislature.
The state’s got to provide some incentives for regionalization. We’ve got so many fiefdoms out here. It blows my mind. I’ve lived in other places – Maryland, Illinois, Massachusetts, and I’ve never seen anything like it. Where everybody has got this police department, this fire department, this you know, small entity of government, and nobody wants to give up their specific powers, their abilities, their control of pension plans.
The pension plans are a problem that’s going to explode.
JG: PA municipalities pay way more in management fees than they should just to have all these little plans.
BK: Let’s not have the state take them over necessarily, but maybe the state can handle the administration of them somehow, because it’s the administrative costs that just totally wipe them out. We’ve got 3,200 municipal pension plans, where there’s one for fire, one for police, one for administration, and all the rest. Sometimes for 3 or 4 people! The administrative costs aren’t killing them individually, but collectively it’s killing us. Everybody’s worried that their pensions – if we merge or something – won’t be as good as the pension that they take coming in.
JG: What are your thoughts on consolidation? City-county consolidation just recently came up as a topic in the Pittsburgh Mayor race. That seems to be more of a developed issue out there, and I don’t even think any of the candidates are for it. But that’s an issue I’ve been interested in for a while now, and the process is pretty difficult to do in PA. There’s only been two successful mergers under the current process.
BK: I think if you look at the issue nationally, Indianapolis and Louisville are pretty much the models of how it can work, but it may be you need a certain population base to make it work.
JG: Like a minimum of 5000 people in a municipality or something. One development I’ve been watching is in Cuyahoga County in Ohio, where they’ve been trying out this “contract cities” model based on Los Angeles, where the county offers a menu of municipal services and municipalities can contract for those services from the county instead of administering them in-house. So what the Cuyahoga County Executive did was he started offering a police service and a fire service and a few others, and give municipalities the option of buying in. So they’d make a swap and pay a bit higher County taxes, lower their municipal taxes, and stop operating those services themselves.
I’ve been thinking maybe a good entry point for this idea in PA would be the controversy over exurban townships who rely on state highway patrols for their municipal policing needs rather than operating police departments. If you could potentially task county governments with providing police service to those townships that don’t have their own departments, and then when there is a county police force up and running, other municipalities could have the option of buying into that.
BK: I was in Lackawanna County and there was a Sheriff candidate who talked about that – getting folks off of the state police because they’re not as responsive. They’re just not. And so he wanted to provide a County service to those municipalities if they’d buy in, as a way to get better protection and better response times.
JG: The policing needs in some of these areas don’t seem to be so great, and I can see how some of the exurban and rural areas can get by without a municipal police department, but then you have the central cities who are paying not just for more current officers, but also more retired employees.
BK: That’s a huge problem for cities – Pittsburgh’s pension problems are just devastating. We’re lucky in Harrisburg – we don’t have a pension issue. We listened to PMRS [Pennsylvania Municipal Retirement System] about how much to save, how to invest it, and we feel safe that we have good pension programs for all of our employees so that’s one area where we got it right that’s not adding to our deficit. So much of the problem is just spending more money than you’re taking in, and the tax revenue is not what it used to be, and then in Harrisburg only 48% of the property is taxable. I’ve heard from other cities where it’s in the 30% range.
JG: That’s crazy! What do you think we should do about tax-exempt properties? I saw there’s been a constitutional amendment proposed, which we’ve been referring to as the “Leave UPMC Alooone Amendment” that would have the effect of limiting challenges to some of these large mislabeled non-profits that actually behave just like for-profit companies. Many of the local politicians in Pittsburgh have been upset about this amendment because they’ve been challenging UPMC’s non-profit tax status.
BK: It’s a tough nut, because we’ve got large non-profits like UPMC which are seemingly taking over the entire western part of the state. Yes, they do good work, and hey – they cured polio. What’d you guys do in the last 50 years? We cured polio so, you know, shut the hell up.
JG: Sure, we’ve gotta give ‘em some props for that.
BK: But so many of the other non-profits are sincerely struggling, so while you can try to work out a Payment In Lieu of Taxes (PILOT) system, that really becomes like a mandated tax then. A PILOT is no longer a PILOT once it’s mandated. And the state’s been in a difficult situation, I mean the state could lead the way on that. They could give a certain contribution to their host communities, and Harrisburg obviously is the biggest one. And part of the problem is they can’t just give money to Harrisburg because then Altoona and Erie and Allentown and everywhere with a state output is gonna want money for the properties the state has in their cities as well.
I can’t say too much about it but the state has found out, with the receiver, some innovative ways to give the city some sustainable income because that’s the problem. Once we get rid of the incinerator, although it doesn’t make a profit, it does make money, and 20 years down the road when we’ve sold that and our parking garages, we’re losing that income out of our city budget every year.
JG: I think a good way around the tax-exempt non-profit properties issue would be to only charge them for the value of the land that they use. Like I know Harrisburg has a split-rate real estate tax. Allentown has the split-rate tax too, and so do about 18 other local governments since PA state law is especially favorable to this. I like the idea of charging only for the land value, because though we want to encourage the non-profits to build the facilities that they need, and the equipment that they need to do their work, we really don’t want to encourage non-profits to eat up a ton of land in our older downtowns.
BK: It’s a big problem – especially in Harrisburg. Lots of entities that – and they don’t use that much land for the most part – but churches and cemeteries and those things add up to a lot of lost property tax revenue.
Now, the Lieutenant Governor is the head of the Local Government Advisory Committee which has some direct oversight over DCED, it works with them, it can talk about legislation and try to get it pushed through, or it can at least push on the agendas to make some changes and get more autonomy and freedom for these municipalities – I don’t care at what level – counties, school boards and the rest need more flexibility.
Mr. Cawley has had [pause] one meeting of the Local Government Advisory Committee.
JG: Yeah they’ve done nothing on this.
JG: You see other Republican Governors like Chris Christie, John Kasich, and Rick Snyder taking a look at how having all these tiny local governments is really costing their states a lot of money and productivity. They’ve come up with a pretty robust conservative-flavored argument for trying to streamline local government. I don’t know why Tom Corbett hasn’t done anything on this, with Pennsylvania having as many local governments as it does.
The Corbett administration has kicked all these tax increases down to the local level. Chris Christie’s done the same thing, but the genius of the Chris Christie strategy is that he has a persuasive prescription for how municipalities should respond: “You guys have a ton of waste and duplication down there, and you have room to streamline your services by combining governments, shared-service agreements, etc. You don’t actually have to raise taxes. My cuts won’t really hurt you if you’re doing what you should be doing.” Tom Corbett doesn’t have an answer for how municipalities and school districts should respond to the state cuts.
And there was a municipal consolidation reform bill in 2009 that was supposed to make it easier for voters to initiate a study of shared service agreements or outright merging of political units. But it’s still way too difficult for citizens to initiate this. I believe municipal governments still have to pay for the study, which just gives local politicians the easiest excuse ever – “well, I’m not gonna pay for that…”
BK: Infrastructure is a huge problem for local governments. We got this transportation funding advisory study that recommends about $2 billion in maintenance, but it’s just for the state roads, it doesn’t really touch the 27,000 miles of local roads. There’s very few County roads in this state. Most of the County responsibility is bridges, which is important, and I didn’t know this until recently but we have all these structurally deficient bridges – what that means is, when they build a bridge they build it so it can hold 140,000 lbs, but over time there’s some wear and tear on it, and then they say it can only hold 80,000 lbs. Not a problem, but then it gets to the point where they have to start lowering the weight restrictions on it – that’s when it become structurally deficient. So maybe it’s 60,000 or 40,000 – still safe but [pause] something’s bound to happen. It’s going to be like what happened in Minneapolis.
JG: Water infrastructure issues are another big problem for older cities. It seems to be happening in Philly all the time lately where some water pipe will burst and everybody’s basements flood.
BK: Exactly. These are the main reasons why I’m running to help local governments – the financial issues – although many places are not experiencing the distress that Harrisburg is facing, they’re still going through these major financial concerns, they’re spending more than they’re taking in, and the state’s not a partner with them. I won’t say it’s an enemy, but maybe a bystander who is very indifferent to what is happening to them. And there’s got to be a significant change in that.
So that’s the main premise. Second of course is Marcellus Shale – the Lt. Governor is head of the Marcellus Shale Commission.
JG: I was going to ask – I like that you are focusing on the local government issues, but what else does the Lieutenant Governor do? What other powers would you have?
BK: The main responsibility is the one that’s not really seen too much, but is the one I obviously want to do something with, is the Local Government Commission. The other thing is Marcellus Shale. I mean it doesn’t matter if you’re for it, against it, or indifferent to the drilling, the fact remains we should have handled this differently. We’re losing $400-500 million a year. They just told us what we made last year on the wells, it was about $198-199 million. You know, if it’s here, if they’re drilling it – I still think New York did it the right way, with a moratorium until we figure out if it’s safe. They were kind of able to use us as the test case to see what happens when you screw it up -
JG: Right, they got to see what happens when a state does nothing to restrain drillers from doing whatever they want
BK: We’ve seen this happen too many times before, with oil, with timber, with coal – they take our asset. It’s our asset, they probably don’t pay us what it’s worth, they hurt our environment. Obviously the water table is a big concern, but the infrastructure too. Heavy machinery, heavy trucks that are hurting our roads and bridges, and when the resource is gone they skip town and leave us holding the bag. We’ve seen it happen with oil, and coal, and timber in this state and we can’t let it happen with natural gas.
So that is one of the purviews of the Lt. Governor office – heading the Marcellus Shale Commission – and we need to get back in there, get that Commission shifted obviously. And a lot of that is going to be based on who our Governor candidate is.
JG: Who gets appointed to the Marcellus Shale Commission?
BK: Lieutenant Governor’s the head, but it is supposed to be a consortium of stakeholders in the industry, people being affected by it, normal people, environmentalists, etc.
JG: Who appoints them?
BK: You got me – I don’t know that. I’m gonna have to go back and look, I’m not sure whether it’s the Governor or the Lt. Governor. [Ed. note: It's the Governor] But it’s a political appointment, and right now it’s tilted toward the gas drillers. Look, the gas industry has been giving money to Tom Corbett since 2004 when he ran for Attorney General. That’s not the way to do it. It blows my mind how Tom Corbett has been accepting gifts from them. I’m sorry, you’re the Governor of the state. You make enough money. Somebody can offer you tickets to the Superbowl, but pay for em! Sure, go to the Superbowl, have a good time, but pay for it man! It’s 13 grand. It’s just not worth the headache.
BK: But they should be banned. All the gifts should be completely banned.
The third thing the Lt. Governor is in charge of is PEMA [Pennsylvania Emergency Management Agency], and that is switched – it goes back and forth whether the Lt. Governor is head of PEMA or is just a board member. Catherine Baker Knoll was the head of it, but for some reason Cawley is just on the board of it. So I think that may be up to the Governor, what role they want the Lt. Governor to take. But I was Jack Wagner’s point person on PEMA from 2006-2008. There’s issues like the state radio system, which hasn’t been up to snuff for years. We’ve got counties taking it upon themselves to make sure that their county radio system is working. There was so much money coming into the state after 9/11 for emergency management, things like that, and a lot of the equipment was a lot more expensive than they originally thought. So there are some serious things that PEMA needs to do and fix.
The Lt. Governor is the head of the board of pardons. I’m not gonna float my boat one way or the other, that’s important and I’m going to take a very serious look at everything that would come through.
JG: Marriage equality is a big topic in Democratic politics right now, and most Democratic voters are going to want to see the party’s ticket fully in support on LGBT equality. What do you think we can accomplish on this if the Democrats win in 2014? Do you think Republicans will cooperate at all?
BK: We had the anti-bullying bill in the state House and the sponsor of the bill was a Republican. Ok – if that’s the only way that’s going to get passed, that’s the way it’s going to get passed, I don’t care if it’s a Republican or a Democrat. That’s the thing with the LGBT issues and marriage equality. Marriage equality is important, we want that, we want to get it passed in the first term of the next Democratic Governor and Lt. Governor. But – we don’t have an anti-bullying law. We don’t have a law that prevents discrimination on residence, or employment. We’re worse off than people think we are here in this state.
JG: I agree – marriage is very important but I sometimes feel like it’s siphoning activist energy and attention away from other important LGBT causes.
BK: You’d think the employment discrimination protection in particular would be there, but even during the Rendell years not much happened. Many times this happens – during the Clinton years everybody thought everything was going to be great, everything was going to change in 1993-1994. But I talked to some advocates and they say that’s almost the worst time for causes, when sympathetic politicians get elected, because everybody thinks everything’s going to be fine and they stop giving money to these causes. So in some ways it’s almost better to have that villain to fight against.