Harrisburg’s investment in a minor-league baseball team is still draining the Pennsylvania capital’s coffers six years after the city, which was placed under receivership in 2011, sold the club.
The city of 50,000 had to cover $182,514 in debt service through Nov. 20 as proceeds from the sale of the Harrisburg Senators, a farm team for Major League Baseball’s Washington Nationals, were unable to cover all the costs for $18 million in stadium bonds, according to Gerald Cross, a consultant for state-appointed receiver William B. Lynch. The securities were issued by the municipal redevelopment authority in 2005,
Former Mayor Stephen Reed, who left office in 2010, bought the Senators for about $7 million during a 28-year tenure that included borrowing millions for a hydroelectric dam and Wild West museum that were never built. The city sold the team for about $12.5 million in 2007, according to Lynch.
Municipalities from Glendale, Arizona, to Harrison, New Jersey, have pledged public funds for stadiums as tools for economic development. About $7.6 million in Harrisburg’s revenue-backed stadium bonds remain outstanding, some maturing as late as 2030, city documents show.
Harrisburg is already dealing with the aftershocks of debt guarantees for a waste-to-energy plant that pushed the city into an unsuccessful bankruptcy filing and state receivership in 2011. The city also backed securities for the home of the Senators on City Island in the Susquehanna River, now known as Metro Bank Park. The team placed first in the Eastern League’s Western Division this year.
Annual payments by the team’s owners, Harrisburg-based Senators Partners LLC, aren’t enough to make the debt payments, which the city is covering from its general fund, according to a recovery plan issued by Lynch.
This year, Harrisburg received $472,000 in permit and parking fees from the Senators, said Cross. With debt service on the 2005 bonds totaling $654,514, the city had to make up the $182,514 remainder from its general fund, he said. That amount could cover the salaries of two police sergeants, according to data from the 2013 budget.
The chairman of Senators Partners is Michael Reinsdorf, president of the National Basketball Association’s Chicago Bulls. Reinsdorf’s father, Jerry Reinsdorf, owns the team as well as Major League Baseball’s Chicago White Sox.
Bob Philbin, Harrisburg’s chief operating officer, said by telephone that the city’s payments on the stadium debt are “certainly manageable.” Kevin Kulp, president of the Senators, declined to comment by e-mail.
While Harrisburg posted operating revenue of $437,464 for Metro Bank Park last year, it also recorded a $960,488 charge for depreciation. The city was left with an operating loss of $523,024, according to a financial report issued Nov. 17.
Including non-operating expenses such as interest, the Harrisburg Senators Fund had a loss of $942,600 in 2012. That was partly offset by a $219,300 contribution from the city’s general fund. The loss included $417,884 in interest expense on the bonds that remain outstanding.
Cross said it’s common for municipalities to post depreciation to reflect the theoretical cost of replacing or renovating an asset.
Cory Angell, Lynch’s spokesman, said the receiver plans to focus on the stadium bonds after he sells the trash facility and leases the municipal parking system to pay creditors on the incinerator debt. Deals financing those transactions are expected to take place in the first week of December, Angell said.
Lynch “is continuing to investigate the issues related to these bonds, with the goal to resolve matters in such a manner that the city will no longer need to pay a portion of the debt service,” according to the plan, approved by the Pennsylvania Commonwealth Court in September.
The case is Walker v. Harrisburg Authority, 569-MD-2011, Pennsylvania Commonwealth Court, Pennsylvania (Harrisburg).