Harrisburg Must Remain in State Aid Program

(CN) - Elected officials cannot sue the governor of Pennsylvania over the forced inclusion of Harrisburg in a state aid program that restricts taxing powers, a federal judge ruled.

The Financially Distressed Municipalities Act, or Act 47, lets financially distressed municipalities in Pennsylvania to request technical and financial assistance from the state government.

Harrisburg entered the Act 47 program in 2010, but the city council abruptly bowed out after seeing the commonwealth's recovery plan.

The plan allegedly sought to finance future operating budgets by selling Harrisburg's income-producing assets, but it allegedly failed to provide a new revenue source, such as a nonresident wage tax, to compensate for the loss of such assets.

Harrisburg officials say state lawmakers object to a wage tax as a political gambit for their suburban employees and constituents.

Months later, Gov. Thomas Corbett amended Act 47 to unilaterally designate financially distressed municipalities, declare a state of fiscal emergency, and put the municipalities into receivership.

Corbett used these new powers in 2011 to declare a fiscal emergency in Harrisburg and appoint David Unkovic as receiver.

Unkovic filed a recovery plan for the city in February 2012, and it quickly won court approval.

Several citizens opposed to the measure filed suit, but U.S. District Judge John Jones III shot down the challenge in May 2012.

Unfazed, a group of city officials filed a similar suit the following month.

Jones said last week that the new case fails for much of the same reasons cited in the old case, Harris v. Corbett.

As then, "Harrisburg stands 'on the verge of a debilitating financial collapse, burdened with well over $300 million in debt, and that it has already ceased payments on some of its obligations,'" according to the ruling.

In a motion to dismiss, the governor argued that the political subdivision bars a lawsuit by city officials, and "that the Plaintiffs assert a generalized grievance not cognizable by this court," Jones summarized.

Jones sided with the state again Wednesday.

"While the plaintiffs, who as noted are a subset of the Harrisburg City Council as well as other city officers, purport to bring these claims in their official capacities on behalf of the city of Harrisburg, there is no evidence that they posses the authority to do so," he wrote. "It is patently evident that city council simply could not muster a general consensus or resolve to bring suit challenging Act 47 amendments. However well-intentioned they may be, in the absence of an official resolution bearing the imprimatur of the Harrisburg City Council of the mayor, the plaintiffs cannot launch freelance litigation on the city's behalf simply because they happen to be elected officials.

"Notwithstanding this apparent preclusion, the plaintiffs' claims, even if properly brought on the city's behalf are also barred by the political subdivision standing doctoring. This doctrine holds that a municipality 'created by a state for the better ordering of government, has no privileges or immunities under the federal Constitution which it may invoke in opposition to the till of its creator.'"

The officials had tried to show standing by pointing to a July 2012 mandamus action that threatened legal action if they did not take official action on the Act 47 Recovery Plan.

But Jones found that the officials failed to allege this issue in their complaint, and that their rights as elected officials cannot confer standing.

Since the complaint predated the mandamus action, "at the time the complaint was filed, any harm to the plaintiffs was necessarily hypothetical at best," he wrote.

"The plaintiffs have offered not argument supporting their contention that the act's impact on their official roles confers standing in their individual capacities, and we can ascertain no independent basis to arrive at such a holding, especially in light of the absence of argument form the plaintiffs on the point," he added.

A state law claim remained, but Jones refused to assert supplemental jurisdiction. "Nothing prevents the appropriate plaintiffs from either initiating a declaratory judgment action or seeking injuctive relief in the courts of the commonwealth which are, undeniably, better equipped to address the difficult state law questions presented by this litigation," he wrote

"No federal law or policy is implicated by the Plaintiff's state law claim. Accordingly, we appropriately decline to intervene into these murky areas of state law, which we believe are best left to the excellent judgment of our able judicial colleagues on the state benches."

Harrisburg says its dire financial straits stem from its attempt to rebuild a municipal incinerator that it had to shut down in 2003 for environmental reasons.

The incinerator is up and running, but a host of unforeseen technological problems have undercut a plan to sell resulting steam to commercial buildings.

Act 47 is allegedly supposed to help distressed municipalities by letting them tax the wages of nonresidents, but the Harrisburg officials say they are encumbered by a plan that "expressly prohibits" the city from trying to increase "the rate of an earned income tax imposed on nonresident workers ... until the secretary terminates the distressed status of the city."

Cities in distress are not free to exit Act 47 without state approval, and according to the complaint, "no municipality that has applied for and been designated as a 'financially distressed municipality' has ever exited the Act 47 process."

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