Posted by: Ann Corcoran | August 5, 2012

A tale of two cities: Will Hagerstown follow Harrisburg into bankruptcy?

….and, can the Tea Party save the Nation from falling off the fiscal cliff?

Seventy-seven miles stretch through mostly rolling farm country along Interstate 81 between Hagerstown, MD and Harrisburg, PA, but somehow the message about running up local debt for grandiose projects and the horrible consequences hasn’t made it from the Pennsylvania state capital to Hagerstown, Washington County’s seat of government.

Two recent articles in the Hagerstown Herald Mail jump out as warning signs to elected officials that the bankruptcy trend occurring in rapid fire, not just in California, but elsewhere could happen to Hagerstown one day.

The first article that shocked me was this one about Hagerstown’s already under construction Taj Mahal of a public library.  How many of you go to a library more than once or twice a year?  I must confess, I haven’t been in one for years because of the ease with which one can get books cheaply and easily elsewhere.  Open the link and look at the photo!  The library (which will open 6 months late) will be as large as Rockville’s!  (Hagerstown population 2010: 39,662, Rockville 2010: 61,209)

The original construction bid for the project was $15.9 million, but there have been $500,000 in approved change orders so far, Kroboth said. Several hundred thousand dollars more in change orders are expected, he said.

Two issues that workers ran into that delayed the project were poor soil conditions and the discovery of an underground tank, Kroboth said. The abandoned fuel storage tank was discovered in May 2011 and had to be removed in accordance with state environmental guidelines, according to Herald-Mail archives.

Library supporters (lobbyists!) will be quick to say the cost will be borne by the county and state and not the city, but it’s still taxpayer money for a library twice the size of the old one.   By the way, the library is located within blocks of the proposed sport stadium, so expect some of those same soil and environmental problems to be present there as well.

Now to the stadium!

Yesterday’s Herald Mail headline blared:   Hagerstown plans to sell bonds to fund projects including proposed stadium

The city of Hagerstown plans to sell $9.08 million in bonds to help fund a number of projects, including $4.42 million for property acquisition, facility design and site preparation for a downtown multiuse sports and events center, and $250,000 to buy and level the defunct Municipal Electric Light Plant.

More than half of the bond money, or $5.397 million, would go into the general fund in the 2012-13 fiscal year budget.

The largest sum of that would go toward the preliminary work on the proposed stadium facility that potentially could house the Hagerstown Suns baseball team. A little more than $2.2 million in general fund money already is budgeted for the project this fiscal year.

Read it all.

Harrisburg’s plight should send a message to Hagerstown, but is it already too late?

A stadium and a black-mailing sport team were only part of their problem!

From the Manahattan Institute  (emphasis mine).  This article by Steven Malanga is from the fall of 2011 and I don’t know how Harrisburg is faring today, if it’s getting out from under its debt or not.  But, one thing to remember, Harrisburg is the state capital and the state is surely concerned about its fate.  In contrast, Hagerstown is nothing but a backwater from the point of view of the Dems who run Maryland and there will be little impetus for the state to bail out the city.

During an April 2009 debate among candidates vying to be mayor of Harrisburg, Pa., one aspirant suggested that the financially troubled city should sell some of its valuable historical artifacts and use the proceeds to finance a “Harrisburg Museum of Bad Ideas.” One compelling exhibit would be the city’s recent decision to file for bankruptcy protection.

Harrisburg, the capital of Pennsylvania, is drowning in debt. City officials have known for more than four years that they’d have to deal with the fiscal mess, but they punted. The state has engineered a bailout plan, but the city council rejected it. Instead it has asked creditors to forgo as much as $100 million of the debt. Essentially, the city council is engaged in a giant game of brinksmanship with the state and creditors, daring them to come up with something that’s less onerous than the current state plan, which involves asset sales and renegotiating union contracts.

Does this sound familiar?  And, the stadium was a bust:

Under seven-term Mayor Stephen Reed, who governed from 1982 to 2010, Harrisburg had a long love affair with borrowed money, using it to spur projects of dubious value. The city invested millions of dollars in a stadium in the late 1980s to attract a minor league baseball team. When the Harrisburg Senators threatened to leave in 1995, the city bought the team with borrowed money. In 2009, even as the fiscal clouds darkened, it sank another $45 million, including $18 million in new debt, into upgrading the stadium. The team was attracting 2,488 fans per game.

If private investors won’t build the project, why should taxpayers take the risk?

Harrisburg’s creditors, including municipal bond insurer Assured Guaranty Municipal Corp., have also sued the city. The municipal finance industry will be watching what happens with keen interest—because Assured Guaranty had received city and county debt guarantees. The county has lived up to its agreement and made payments to bondholders, but Harrisburg has not.

The Harrisburg case raises fundamental questions about the way cities and states increasingly use debt to finance speculative development that private investors or lenders won’t touch. From minor league stadiums to arenas, museums, downtown redevelopment and waste plants with unproven technologies, billions have been spent on schemes of questionable value. Some projects are backed by unrealistic economic projections, which leave taxpayers on the hook for bond payments or operating subsidies. These deals are one reason why state and local debt outstanding has ballooned from $1.3 trillion to $2.5 trillion in the last decade, according to the U.S. Federal Reserve.

Perhaps the country does need a national museum of bad government ideas. Harrisburg would be a good place for it.

The Tea Party needs to think (and act!) locally and could save the nation by doing so!

Now to a recent article from the American Spectator.   The Crime Scene is local!

Writer and political observer, Ned Ryun, says that most politicians in Washington (in both parties) got there from local government where they learned their big borrowing and big spending ideas.   (Again, emphasis below mine)

So we can rightfully chide Washington for growing, borrowing, and spending without regard to the burden doing so places on America’s future. But state and local governments who followed Washington’s lead are now in far worse shape. This should be a clarion call for conservatives to stimulate wholesale reform at the local level. That’s where most elected officials begin their careers, learning to spend like drunken sailors, craft deals with unions, and tax people into oblivion.

Ryun:  Unseen debt is like termites….

This “shadow debt” puts us right in line with that bastion and paragon of fiscal responsibility and economic growth, Italy. Both the U.S. and Italy presently have a 120 percent debttoGDP ratio when all debt is included. Greece is at 160 percent. With skyrocketing pension liabilities, rising budget deficits, and elected officials unwilling to force change, it won’t take us long to blow past Rome and start nipping at the heels of Athens.

“Unseen” debt and obligations at state and local levels, with California and Illinois leading the way, could ultimately be the termites that destroy the economic foundation of our country.

The Tea Party is really the only hope, IF it focuses on the local crime scene!

Many have speculated on the demise of the Tea Party, citing its lack of impact on the presidential primary. Here, too, the commentators miss the point, which is that, as a local movement, Tea Party organizations are primed and ready to have an even greater impact on our future. Instead of just helping change Washington over one or two cycles, they can fix the breakdown where it begins: at the bottom. And the results of transforming America from the bottom up, across a broad swath of states and locales? National, generational change—if the Tea Party will stay focused on those levels.

The crime scene is local. Make no mistake, our communities—not Washington, D.C.—are the real battlegrounds of our fiscal crisis, and the trenches where America’s future will be decided. They are also the stage on which massive national change can occur. If we can win there, in thousands of municipalities across the country, we can force the debate, and the nation itself, in the right direction.

Hagerstown(before it becomes Harrisburg) is a great place to start to change the Nation!

Thanks to Richard Falknor at Blue Ridge Forum for directing me to authors Malanga and Ryun.


Responses

  1. […] the traffic, the noise and the lights will have some affect on their parishioners.  And, that grandiose library our Republican leaders are building is only a couple of blocks away, so much for a quiet location to […]

  2. […] Harrisburg, the capital of Pennsylvania, is drowning in debt. City officials have known for more than four years that they’d have to deal with the fiscal mess, but they punted. The state has engineered a bailout plan, but the city council rejected it. Instead it has asked creditors to forgo as much as $100 million of the debt. Essentially, the city council is engaged in a giant game of brinksmanship with the state and creditors, daring them to come up with something that’s less onerous than the current state plan, which involves asset sales and renegotiating union contracts.Source: wordpress.com […]

  3. […] also a related post—will Hagerstown follow Harrisburg off the financial cliff, here. Like this:LikeBe the first to like […]


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