Harrisburg, Pennsylvania's Capital, Is Declared `Financially Distressed'
Harrisburg Is Declared ‘Financially Distressed’
Bradley C. Bower/Bloomberg
Pedestrians walk in downtown Harrisburg, Pennsylvania.
Pedestrians walk in downtown Harrisburg, Pennsylvania. Photographer: Bradley C. Bower/Bloomberg
Sept. 9 (Bloomberg) -- Pennsylvania Governor Edward Rendell discusses Harrisburg's bankruptcy risk and the actions state government may take to assist the capital city. Harrisburg has already skipped about $6 million in payments this year on the municipal debt related to a waste-to-energy incinerator. It has considered seeking bankruptcy protection to cope with the $68 million in debt service it is responsible for in 2010. Rendell speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)
Harrisburg, the capital of Pennsylvania, was declared “financially distressed” under the state’s Act 47 program after missing $50 million in bond payments it guaranteed this year on an incinerator project.
The city of 47,000, which has considered seeking bankruptcy protection, is the 20th municipality to enter the 23-year-old program, the Department of Community and Economic Development said in a statement today. The department will appoint a coordinator who will have 90 days to develop a recovery plan for consideration by the mayor and City Council.
Harrisburg sought aid under Pennsylvania’s Act 47 for distressed communities in the face of $282 million in debt it has guaranteed for an incinerator operated by the independent Harrisburg Authority. City officials could still seek bankruptcy protection without the state’s approval, Jamie Yates, a spokeswoman for the community department, said in an e-mail.
“This is an important first step on the city’s road to fiscal recovery,” Mayor Linda Thompson, a first-term Democrat who opposes bankruptcy, said in a statement e-mailed by her office. “There will be difficult choices to be made by the city’s leaders as we craft a comprehensive long-term recovery plan. But, we have an opportunity to become the model for comeback cities, and it is my intention to seize that opportunity.”
Payments Skipped
Harrisburg’s missed payments on the incinerator bonds this year include $35 million that was paid to holders of 2007 Series C and 2007 Series D bondholders today by Dauphin County, which encompasses the city and is a co-guarantor of a portion of the bonds.
The city has been sued over the missed payments by the county and by the bonds’ insurer, Hamilton, Bermuda-based Assured Guaranty Municipal Corp.
“We view Harrisburg’s qualifying for protection under Act 47 as very positive for developing a restructuring plan that will allow the City and Authority to meet their obligations to bondholders, AGM and the county,” Assured said in a statement.
A 1997 Harrisburg zero-coupon bond issued at 5.5 percent and maturing in January 2019 traded in September to yield 8.303 percent, according to data compiled by Bloomberg.
The Act 47 ruling was made after determining that Harrisburg had failed to meet its debt obligations to various parties and that outstanding claims exceeded 30 percent of the city’s budget with no ability to negotiate a resolution of adjustment, according to the Community and Economic Development Department statement.
“This determination will bring objectivity and financial expertise to a city that desperately needs a path to fiscal recovery,” Austin Burke, secretary of the department, said in the statement. “Taxpayers, creditors and investors will take comfort in knowing that Harrisburg is headed in the right direction.”
To contact the reporter on this story: Dunstan McNichol in Trenton at dmcnichol@bloomberg.net
To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.
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