NCPA - National Center for Policy Analysis

The Man That Bankrupted Harrisburg

December 27, 2010

Harrisburg, Pennsylvania, has teetered on the edge of fiscal ruin for over a year.  Its debt crisis stems from a long borrowing spree by its recently retired mayor, Stephen Reed, who governed the city for 28 years, says Steven Malanga, the senior editor of City Journal and a senior fellow at the Manhattan Institute.

Reed borrowed liberally to invest in projects that the private sector wouldn't finance on its own: building parking garages downtown; constructing and later renovating a baseball stadium; and then buying the minor-league baseball team, the Harrisburg Senators.

Over the last decade, Reed began to spend borrowed cash in ever-riskier ways, says Malanga.

  • In 2003, the local newspaper, the Patriot-News, discovered that he had used public debt to buy nearly $5 million in American historical artifacts, including a $125,000 pistol once owned by Doc Holliday, in anticipation of opening a Wild West museum in Harrisburg.
  • Neither the museum nor the purchases had city council approval.
  • Then Reed put together the incinerator project, seeking to upgrade a local plant with speculative new technology.
  • Design flaws and delays plagued the project, burdening the city with nearly $288 million in debt and $70 million in bond payments this year alone.

In September, Pennsylvania governor Ed Rendell announced that the state would help the city meet its general-obligation bond payments, fearing that a default would make it impossible for other state municipalities to borrow.  But Harrisburg remains deeply indebted.  The city's predicament ought to be a warning to other cities that use borrowing to finance projects of questionable economic value, says Malanga.

Source: Steven Malanga, "The Man That Bankrupted Harrisburg," City Journal, December 2010.

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