Is Harrisburg's Nightmare America's Future?

The city of Harrisburg is Ground Zero for America's municipal debt crisis.

Pennsylvania's capital city has liabilities estimated at $610 million, which is nearly 10 times its annual budget. The city is so deep in the red that last year it attempted to file for bankruptcy. Reckless spending did more than ruin Harrisburg's balance sheet; it crowded out private industry and distracted from the city's core functions. Today, Harrisburg is a dangerous, poverty-stricken city, with failing schools and a shrinking population.

Harrisburg's fiscal nightmare may be a harbinger of things to come for American cities. In the mid-'90s, local governments embarked on a spending binge, bringing total municipal debt in the United States to more than $2.8 trillion. Along with Harrisburg, Jefferson County, Alabama, Vallejo, California, and Central Falls, Rhode Island have filed for bankruptcy in the past few years. Several more cities are on the brink of default, largely thanks to taxpayer-financed stadiums, museums, housing, commercial complexes, other misconceived economic development projects, and runaway public sector salaries, pensions, and benefit packages.

Few cities can top Harrisburg's recklessness when it comes to spending and borrowing. Mayor Stephen R. Reed had almost complete control over the municipal government during his 28 years in office (1982-2010), and he bears most of the responsibility for Harrisburg's financial ruin. Reed believed that with enough borrowing and spending he could transform his small city on the Susquehanna into a regional center for business and tourism.

Trusting the private sector is "letting external factors, forces, prejudices, misperceptions, bad perceptions, all those things determine the future of your town," Reed said in a 2010 interview. "We'll determine the future of our city."

Harrisburg always went a step farther than other cities. Many municipal governments waste taxpayer money on subsidizing hotels and convention centers. Harrisburg outright bought a hotel in 1993 to prevent it from going out of business. (Today, that same hotel is facing foreclosure.) Many cities waste taxpayer money on sporting arenas. Harrisburg not only built a baseball stadium for a AA baseball team, in 1995 the city bought the team as well to prevent it from decamping for Springfield, Massachusetts.

Many cities waste taxpayer money on museums and cultural institutions. Mayor Reed wanted to create five of his own museums, including one all about life on the American frontier. He spent millions of city dollars buying artifacts for the museum's collection, including Virgil Earp's watch and badge, a Seventh Cavalry telescope, and a Vampire Hunter's Set.

"Much as Washington, D.C. draws millions of people to the city each year with its many museums, or New York City, that's what Steve Reed's vision for Harrisburg was," says lobbyist Randy King, who was Reed's communications director for 18 years.

About 60 percent of Harrisburg students are failing, according to Pennsylvania's statewide achievement exams. After Mayor Reed took control of the Harrisburg School District in 2001, he addressed this problem the only way he knew how: building more empty facades. The Harrisburg School District went on a school construction spending spree, racking up $270 million in debt, which is more than two and a half times Pennsylvania's average school debt per capita.

Reed's costliest venture was an attempt to make money by burning garbage. Harrisburg's incinerator was built in 1972, but it was a lemon from the beginning. Although there's no shortage of cheap landfill in central Pennsylvania, Harrisburg borrowed $125 million to renovate the plant. Reed hired an incompetent contractor and then neglected to get insurance on the job. Today, Harrisburg is liable for $310 million in debt on the incinerator alone.

Last year, a state judge ruled Harrisburg's bankruptcy filing illegal under state law. Now the city's finances are under the control of a state-appointed receiver. Harrisburg's tax base is so depleted there's no way it can make good on its debt. Ultimately state and county taxpayers will bear the burden of Harrisburg's mistakes.

"The economic mess is coming to an ugly end," says designer and business owner Jason Smith, who ran for mayor against Reed in 2005. "And that's a wonderful step forward for Harrisburg. I know that sounds terrible, but we can't live in delusion for ever, and at some point you have to say what is the reality."

Shot, edited, written, and produced by Jim Epstein, who also narrates.

Approximately 7 minutes.

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  • Paul Krugman||

    Pssh. Deficits are irrelevant.

    And, first, bitches!

  • Jose||

    S'up homeboy

  • wsd||

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  • wsd||

    Looking to bring more bisexual passion to your life? Then kill yourself.

  • Old Man With Candy||

    So if you do a good job of matching them up, why are they still eager?

  • Resource||

    Just wrong headed about how wealth is created. Michigan is one the the states that is trying to pass "several bills would impose a 2-year moratorium on the issuance of any new permits for hydraulic fracturing until EPA and the state are able to study its effects."

    Sheesh. Time to move.

  • ||

    Right, and destroying the environment isn't how wealth is created either.

  • In Answer to a Troll||

    The U.S. environment protection agency's most recent findings is there has not been 1 single documented case of ground water contamination attributed to hydraulic fracturing in the over 1 million fracture treatments that have occurred on U.S. soil.

    But you are not interested in data, are you.

  • Dave||

    On what facts is your statement? there has been gas in water for many years. It was and is not unheard of a water well enclosed well house having an explosion even back to pioneer days. It is good to have an open mind yet don't let your brain fall out on either side!

  • austrian||

    GET OUT THE STOSSEL SCISSORS

  • rather||

  • Metazoan||

    Taxpayer-funded stadiums always pissed me off. I have no problems with athletes and owners making tons of money, of course, but I do when the largest capital expense was covered by stealing the money from other people.

  • Almanian||

    But, but...MULTIPLIER EFFECT! ECONOMIX STIMULUSSS!! DOWNTOWN'S COMIN BACK!

  • ||

    The bedrock of our economy is T-shirts, baseball hats, hot dogs, and beer.

  • Jimmy J||

    And just how is Harrisburg supposed to be a world-class city without a stadium and a professional sports team?

  • Bill S. Preston, Esq.||

    But Harrisburg can't get a stadium and professional sports team unless it's a world-class city!

  • Invisible Finger||

    Is that first, second, or third world class?

  • T||

    I'm going with fourth.

  • Almanian||

    Good. The more shitholes like Harrisburg, Detroit and Benton Harbor (MI) collapse, the more people may begin to understand that the same thing is happening at the state and national level.

    Most people don't seem to understand financial reality until it smacks them in the face (and sometimes not then - see Detroit). The more pain locally, the more I believe there's hope for the future.

    The more people are insulated from government at all levels spending money that's not there, the more likely we are to just run full speed off the cliff with no chance to claw back to something resembling fiscal sanity.

    We'll see.

  • Tonio||

    ^This.

  • Raven Nation||

    "the more people may begin to understand that the same thing is happening at the state and national level"

    Sadly, probably not. *Sigh*

  • Almanian||

    I am a hopeful person by nature, Raven :) But I share your doubts...

  • ||

    Almanian, please go rent the movie 'Idiocracy' then get back to us.

  • Almanian||

    I am familiar with this movie...still, I have hope

    "Plants want ELECTROLYTES!"

  • ||

    They crave em!

  • fish||

    There goes Suthenboy with his fag talk again.

  • ||

    I read about it on Wikipedia five minutes ago. Are you sure my head won't explode from the pinko horseshit? Is it at least fed to the viewer in survivable quantities?

  • Masturbatin' Pete||

    Mike Judge. Hardly a pinko.

  • Raven Nation||

    Fair enough Alamanian. I'm definitely pessimistic by nature. Plus, growing up in Australia, I think we're more cynical by nature.

  • ||

    I've tried Googlin' around for news on Grand Rapids, MI - it's a fairly conservative community, but there have been lots of medical research buildings springing up near downtown. I wonder how much is tax payer funded.

    Same with the Meijer Gardens and the Van Andel Arena.

  • Almanian||

    Good question - I don't know how much of their stuff is gummint funded. I thought that the Van Andel/DeVos/Amway stuff is all private, but I may be mistaken.

  • Citizen Nothing||

    Meijer Gardens was built with private money -- but perhaps the city provided the land or "infrastructure" or something.

  • ||

    Ah, my homies!

    I wouldn't mind moving back there, it's fairly bucolic and laid back in spite of the incompetent leadership, but either you work for the State or you scrounge up one of the few private sector jobs around. Big surprise that it's in the shape it's in.

  • ||

    I've always thought that Harrisburg was a shitty little town in an awfully pretty place. If you changed everything about it, it would be paradise.

  • Almanian||

    Funny, That's how I feel about Cleveland.

    Approximately seven BILLION times better than the Detroit area, love the area, Lake Erie's bitchin'....but utterly maddening, 19th century government so nicely documented here by reason.tv.

    Straighten out the government, and this would be heaven for Almanian.

  • ||

    You're pretty much spot on. I adore pretty much everything about Ohio except for its governments, and they alone make it nearly unlivable.

  • Almanian||

    I lived in west Central OH (Ottawa) a couple years ago when I was assigned to our Lima location.

    I'd still be living there if they hadn't transferred me back to Michigan. Best people EVER, could shoot my gun out the back door, had 5 acres and a pond out in the country....epic.

  • ||

    My personal paradise is more of the east central part of the state since I like hills, but yeah, that area is super-nice.

  • Citizen Nothing||

    Isn't/wasn't the Lima News part of the Freedom Communications chain?

    The government in Cbus isn't completely incompetent.

  • Masturbatin' Pete||

    Come on down to Cleveland town everyone...

    http://www.youtube.com/watch?v=ysmLA5TqbIY

  • ||

    It really is beautiful, even the downtown area around the Capital. Much of it was built in the 30s, so lots of wide boulevards and semi-deco buildings. The State Museum is an understated beauty on the plaza, right next to the obeleisk that is the State Archive. They both look like they're out of a ST:TOS street set.

    The Susquehanna is gorgeous, esp if you go north to Duncannon. Lots of rocky small rocky islands dot the river and sheer granite cliffs as you drive along it.

  • ||

    Like Marlon Brando but bigger
    You'll find that creature at the bottom
    Of the deep down Susquehanna River

  • Leftist Behavior||

    Lancaster is the best city in south central PA in my experience.

  • Almanian||

    Pretty much anyplace without Yinzers is a good part of PA....

    (I said that for Warty's benefit)

    My mom was born south of Pittsburgh in Warrrrrrshington (as my grandma used to say). Lovely, lovely area.

  • ||

    We used to play Washington in football when I was in high school. There's another dump of a town set in the middle of paradise.

  • Leftist Behavior||

    Haven't you heard that Pittsburgh is the new "in" place for hipsters with a Rust Belt ruin porn fetish? All the yinzers are being run off because they are too provincial.

  • ||

    One of my friends and his family ran from Pittsburgh. He always says he couldn't take any more bullshit from the government (he owned a bar).

  • UvalDuvalCuckoo||

    Betcha won't find any hipsters kicking it over here http://www.youtube.com/watch?v=6xjQOBTrBdc

  • UvalDuvalCuckoo||

    It's ok to ridicule Yinzers, even most Pittsburghers do. Warshington isn't even Yinzer land thought, Sahhside, cross the river from dahntahn is where the real Yinzing goes on. Then again, just a short distance north of Da Burgh (Butler, PA) gave us Santorum, so maybe Pittsburgh isn't so great after all.

  • ||

    I used to live in Beaver County, right down the Ohio River and Rt. 65 from Pittsburgh. I could be in Downtown Pittsburgh in 25-30 minutes and could walk up the street 100 yards and go hunting, or down the street 250 yards and go fishing. No one posted their land so you were free to hunt and ride dirt bikes (and yes, gambol) all over. Add in lazy police and lax enforcement (no complaints about drag pipes on your bike)and it's a fun place to live.

  • Ted S.||

  • ||

    The U.S. is filled with places that used to be good places to live in, then the African Americans came.

  • Another Bigot||

    And also the spics, gooks, kikes, micks and wops.

  • Yet Another Bigot||

    Don't forget about the fags!

  • ||

    Mostly it was the women.

  • UvalDuvalCuckoo||

    I blame the Koch Brothers and the Gambol Lockdown, I can't prove it but my buddies at DU swear they have evidence that the Koch Brothers were pulling the levers when Slavery got started and have been working steadily at it ever since then.

  • The Koch Brothers||

    #WINNING!

  • Tupac||

    First Abraham Lincoln and then Martin Luther King. When will somebody finally stop the Koch Brothers?

  • Spoonman.||

    The list of "9 American Cities and Counties Going Broke" (link is from "Several More Cities") reads like a list of "Things No Reasonable Person could Possibly Think are Within the Scope of Local Government."

    Salem, NJ
    Credit rating: Ba3
    2009 revenues: $7,059,000
    2009 debt ($000s): $10,098,000
    Median household income: $28,397

    Salem guaranteed bonds issued to finance an office building downtown.

    WTF? A city building an office building on spec?

    Besides, look up Salem, NJ on Google Maps. It's in the middle of nowhere. Why would anyone locate an office there, even if rent were free?

  • Tony Soprano||

    Many of my associates have "retired" to the Salem area.

  • Realist||

    YES!

  • Kwanzaa Cake||

    This is a revenue problem, right? Just raise taxes and everything will work out fine.

  • ||

    Now you are seeing the light!

  • Tony||

    The Global Minimum Tax that Sperling mentioned will remedy the deficiencies caused by all you shirkers!

  • ||

    Don't think small. Universal minimum tax. Bring on Krugman's aliens, then lets tax 'em!

  • UvalDuvalCuckoo||

    Noticed that awesome domain name, if you're ever in the mood to sell it, I'd gladly buy it, support a Global Minimum tax to boot.

  • ||

    Ha! I just checked out the city on Wikipedia. It claims that in 2010 Forbes said it was one of the two best places in the US to raise a family. And that it is a recession proof town. I guess that is one way to describe beating the rest of America to fiscal oblivion. "Come live here 'cause it can't get any worse! All we can do is improve!"

  • ||

    "Come live here 'cause it can't get any worse! All we can do is improve!"

    or stay the same!
    I also wrote "Come to Alabama and appear smarter". “Buffalo! A great place to be from.”

  • ||

    Kind of like city-wide Fight Club.

  • WS||

    The Forbes Article is referring to the Greater Metro Area of Harrisburg which is basically everything from Carlisle in the west to Lebanon in the east. I live about 15 miles east of Harrisburg, which truly is a shithole, but I'm pretty happy with the rest of the area, except for our bloated state government.

  • ||

    Epstein,

    You're supposed to start off these posts with a disclaimer saying something to the effect of, "While Meredith Whitney still isn't off the hook,..."

    Is it possible to talk about this stuff without mentioning Meredith Whitney?

    The correct answer is "not yet".

    There's some sort of cognitive bias or rule, I've noticed, that states, "In the public's mind, everyone's position only exists in relation to the most prominent voice with the most extreme position."

    If you have any doubts about that, see Cavanaugh's appearance on television trying to discuss the issue of municipal defaults opposite Gasparino--without having his position assumed to be the same as Meredith Whitney's.

    http://reason.com/blog/2011/03.....go-full-co

    It's a hoot!

  • Almanian||

    Y'know, this site was a lot better when Virginia Postrel was around...

  • ||

    That appearance was from less than a year ago--and the Whitney issue is still relevant.

    Here's the Journal about this and Whitney from a week ago.

    http://online.wsj.com/article/.....06260.html

  • ||

    I think Reason's right on top of this with some real alternatives (after the Drew Carey Cleveland piece).

    Manufacturing's gone. It isn't coming back, at least not like it was. Fracking will make jobs where there's fracking. Tech isn't coming to Harrisburg anytime soon like D.C., the Bay area and other hubs of trade and finance. The city just gets shittier and coasts on fumes and lives off tax money (lots of flies around the pot).

    As the video points out, folks like Reid are using government to recreate what was, not what is, and what is possible.

    Goodbye blue model....hello future!

  • ||

    You know what's really infuriating, what really boils the blood and gives you bloodshot eyes? Powerlessness.

    I'm sitting here, and half of everything around me is falling to shit, and there's nothing I can do about it.

    We can't let this happen to our country. We just fucking can't.

  • Mike M.||

    The most infuriating part about it to me is that it isn't happening by accident; what's being done to us in this country is being done completely intentionally.

  • ||

    Harrisburg does have a lot of natural beauty. Honest, hardworking, generally German-Dutch, Irish, and more conservative people (unlike California), and it's got options...build from what ya got...no more boondoggles.

  • ||

    Maybe when it hits the absolute bottom and the real shit hits the real fan, it'll will mind-fuck the city's population into epiphany -- statism doesn't work.

  • WS||

    The cities population is already mind-fucked. You haven't met the current mayor that the citizenry elected. She truly is a uniter. Everyone is united in hating her whether they are black, white, conservative,liberal, straight, gay, religious, atheist, you name it.

  • Barack Obama||

    Is Harrisburg's Nightmare America's Future?

    Let me be clear.

    Not on my watch.

  • ||

    That's reassuring, Brock, but I'll sleep even easier once your sorry ass is taken out back and shot for everything you've done.

  • Jose||

    Clearly there's another war in our future to distract the voters from Barry "Urkel" Obama.

  • ||

    Also, that beautiful spectacle and tragedy, Detroit, isn't a model. You don't want to end up WITHOUT a tax base.

    Art won't save you, least of all art mixed with some new wave of communitarianism and Lefty, co-op gardens and cottage industries, though I appreciate the scrawled beauty upon ruined walls. There's some hope and opportunity there.

    Go to a Kwame Kilpatrick city council meeting and that ought alone ought to scare you straight.

  • ||

    Why do young, aspiring people leave Harrisburg?:

    1. No jobs, except in gov't, which is ultimately reliant upon tax money. There are some noble folks there in law and gov't, but it won't bring back what was.

    2. Shitty schools. Using dated principles to shift around the wealth that WAS there to the poorest, who are most prone to take handouts and corruption and have the least skills, good habits and work ethic.

    3. An anti-business policy of taxation and redistribution.

    4. Nothing to do, no energy, no opportunity, as all the smart, entrepreneurial folks left to seek their fortune elsewhere following migration patterns out of the Rust Belt (though this is the Eastern edge)

  • ||

    Anyone notice a certain silence in these discussions?

    Tony? Tony? Bueller??

  • Another Bigot||

    This is what happens when other venues are woefully under taxed and provide an opprotunity in a race to the bottom for corrupt businesses and the financial elites to shirk their responsibilities to society by leaving the places that provided them with their opportunities in the first place.

  • Mike M.||

    Krugman is either traveling or on vacation somewhere. He hasn't posted on his own blog since early yesterday either.

  • ChrisO||

    I laughed when the guy in the video used NYC and DC as exemplars for what they wanted the art/culture scene in Harrisburg to be like. It's freakin' Harrisburg!!!

    I don't think any of this is unique to Harrisburg or to that government. In general, I've noticed that state capitals (the ones that aren't major cities) I've visited are almost always trashy and dumpy. Olympia, Salem, Sacramento, Richmond, Trenton, Hartford, Raleigh, Baton Rouge. etc. There's no real economy in these places, and it seems like the dependent class gathers around the source of the money en masse.

    The exceptions I've seen to the above are Austin and Annapolis. Perhaps Harrisburg out to look to those two cities for guidance, rather than trying to be the "New York City of Central Pennsylvania."

    Also, the entire state of Pennsylvania is a bit of a burned-out shell. It's one of the most beautiful parts of the country, but most of the inhabited places look like they peaked around 1948.

  • ChrisO||

    I also forgot to add Cheyenne as a fairly nice state capital, though the circumstances there are probably too dissimilar for Harrisburg folks to look at as a model.

  • Masturbatin' Pete||

    Well, what do Annapolis and Austin have? The UNSA and Texas.

  • ChrisO||

    You're right. My comment below talks about this, too.

    I guess Harrisburg is doomed, after all.

  • Citizen Nothing||

    I like Richmond, but I don't have to live there. I think Cbus and Indy are two examples of (bigger) capitals that are run decently. (But fuck the Cbus city gov. for bailing out the Blue Jackets.)

  • ChrisO||

    I haven't been to either Columbus or Indy (I went around them on their beltways on a drive years ago). Indy is conceptually more like Denver or Boston, in that it's both the political and commercial capital of its state. Harrisburg is a government town with no other industry to support it.

    Columbus might be a better example, though it also happens to host the major state university. In that way, it's more like Austin than Harrisburg. Also having the university seems to bring in a lot more prosperity than simply hosting the state government.

  • Sevo||

    "We'll determine the future of our city."

    Well, he certainly did, didn't he?

  • ||

    The 'burg! Just move across the river to the West Shore. Much nicer.

    Like other cities, Harrisburg's main problem is one-party rule. Republicans haven't been worth a damn in the city since the last GOP mayor in 1982. With no threat of unelection, cronyism rules.

    The city's an embarassment to the state, and the current mayor is brainfreezingly incompetent and as qualified to be mayor as Lindsay Lohan is to be a life coach.

  • db||

    WWLLD?

  • ||

    Don't you guys "other" Harrisburg. With a little work they could have a World Class Orchestra and be more like Cleveland!

  • ||

    Why isn't someone prosecuting that official? Clearly he stole money that wasn't his to spend. That man (along with many other government officials) should be put away for a long time for squandering away our money!

  • WS||

    Noticed that didn't you. Former Mayor for Life Steve Reed would take down a number of political buddies in Dauphin County government and the State Legislature with him.

  • illini||

    Trusting the private sector is "letting external factors...determine the future of your town," Reed said in a 2010 interview. "We'll determine the future of our city."

    Well, there you go. What more is there to say? The government of Harrisburg knew better than private enterprise how to turn a mess into a complete disaster.

  • ||

    I live in Birmingham, wish we were as well off as Harrisburg.

  • Darwin||

    As of the 2000 census, Harrisburg was
    Black 54.83%
    White 31.72%
    Asian 2.83%

    Without even reading further, you can tell from that race breakdown that racial politics and generational welfare have combined to cripple the people. The point is that government bankruptcy is not due to the size and coercive power of the government, it is due to fiscal incompetency, a symptom of the disease which is the BELIEF in egalitarian statism.

    Libertarians get this distinction wrong sometimes: It's not the coercive power that kills business most of the time, it's the incompetence, the sheer idiocy of politicians who think they can spend limitless amounts on "infrastructure" and cause growth. Instead municipal bankruptcy causes a lack of security of property rights, and then businesses leave.

    It's mission creep right on out of the frickin solar system.

  • ||

    Politicians and bureaucrats cannot help being incompetent in fiscal and economic matters in general. Reason? Their view of the world is filtered through political considerations and only political factors affect their decisions. Consequence? Harrisburg, for one. The coercive powers of government is what permits them to make decisions based on the benefits of their choices to their wallets, their friends' and their political allies'. Result? Detroit.

  • ||

    Wait a minute, what was that I saw about bisexual passion?

  • the bilover||

    Nothing to see here, Trundler. Move along.

  • tbuck||

    Are you sitting down? Reed is a Democrat.

  • ||

    In the video a man said he did not see why govt. could not be entrepenuerial. All he need do was drive around his own town to see a dozen reasons. private enterprise has the discipline of the market and creditors that will call your loan and possibly take possession of the collateral. When govt. creates a boondoggle there there is little or nothing value to foreclose on. Their incinerator if privately owned would probably be declared a super fund site and be nothing but a legal liability.

  • ||

    Where did the mayor get the idea that he could handle garbage disposal better than a company like Waste Management Inc. when he had never ran a garbage service? None of these guys ever ran a business where they had to balance the books every month. These imbeciles could not even read a balance sheet.

  • Junie||

    I work in Harrisburg. I park at budding co right across the street from the cameron street bankrupt building. They are doing a great job to build up the energy of the city. They have been filming videos to get everyone excited about rebuilding green. Check them out http://www.buddingco.com Harrisburg has a lot of opportunity to be great. A set back is setup for a come back.

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