By David Fiorenza

Over the past year, the city of Harrisburg has been a bigger story than anything produced by the state and county governments it hosts. With about half its property tax-exempt and with other financial pressures building, the city of about 50,000 has been in decline since at least 2000. But the recent recession pushed it to the brink, bringing its debt and budget problems to the attention of the state and even the nation, particularly when the city filed for bankruptcy protection last week.

The 1990s brought growth to many midsize cities, but generous union contracts, free spending, and big bond issues often came with it. In Harrisburg, a robust economy and increased downtown development reduced the number of vacant lots and buildings, and the city became more of a destination for shoppers, tourists, and small conventions. But the growth also came with questionable decisions by the city government under its longtime mayor at the time, Stephen Reed.

These included the purchase of a minor-league baseball team, approvals of more tax-exempt development, the construction of a $32 million Civil War museum, and the expansion of an incinerator that remains an albatross to this day. During the late 1990s and early 2000s, borrowing was a way of life for Harrisburg, much as it was for many other American municipalities.

Facing massive debts and growing deficits as a result, the city came to require extraordinary measures. But Harrisburg doesn't stand to gain as much from bankruptcy protection, the path chosen by a majority of its City Council last week, as it could have from the state's program for distressed cities, known as Act 47.

The commonwealth has already reached out to Harrisburg with an Act 47 recovery plan that encompassed many of the advantages of bankruptcy, including comprehensive debt restructuring, and cash flow and budget analysis. Chapter 9 bankruptcy, the type reserved for governments, would give the city some leverage with its retirees and other creditors, but it would also require more spending on outside attorneys and consultants. Harrisburg should be renegotiating its existing contracts, not entering into new ones.

The city should reconsider the state's Act 47 proposal. It's an opportunity to show that Harrisburg is coming to terms with its financial missteps and is ready to rebuild confidence. It would foster financial integrity, help the city start meeting its considerable obligations, provide emergency and long-term financing, promote cost containment and efficiency, and possibly strengthen the tax base.

Unlike legislation now being contemplated in the Capitol, Act 47 is not a takeover or a bailout. It's a plan to improve the city's fiscal condition.

Many of Harrisburg's built-in problems will not change. That means Harrisburg has to change. The Act 47 proposal and other reforms - such as a more assertive payment-in-lieu-of-taxes program and sales of unneeded assets - can help the state capital thrive again.

David Fiorenza teaches economics at the Villanova School of Business. He can be reached at