The water system of Harrisburg Authority, the agency that racked up the debt that plunged the Pennsylvania capital into insolvency, closed yesterday on its first bond financing since 2011.
The move was another step in the recovery of Harrisburg, which last month paid on its general-obligation bonds for the first time since 2011.
The authority, which oversees the municipality’s water and sewer systems, sold debt for an incinerator project that the city guaranteed. The agency reached an agreement with Amalgamated Bank to refinance $22 million of securities sold in 2002 and backed by the water system, said Robert O’Brien, senior vice president at the New York-based bank. The move saves the authority, now called Capital Region Water, about $3.8 million in the first two years and adds protection for investors by ensuring that the city can’t divert system revenue for other uses, he said.
“It’s potentially a positive launching point,” O’Brien said. “It’s a catalyst for structural improvements that hopefully will improve the system’s credit profile and its future access to tax-exempt debt financing.”
He said it was the authority’s first water deal since 2011, when it lost its investment-grade ratings as the city’s fiscal crisis took hold. The authority’s last Moody’s Investors Service rating was Ba3 in November 2011, which was withdrawn after the agency failed to provide information, said David Jacobson, a Moody’s spokesman.
Harrisburg, a community of about 50,000, was unable to make debt payments on the incinerator, which didn’t generate enough revenue. Surrounding Dauphin County and bond insurer Assured Guaranty Municipal Corp. made payments after the city started skipping them in 2009.
In 2011, the city was placed under state receivership. In December, it cleared its debt burden of $362.5 million through the sale and lease of assets and concessions from creditors.
Last month, Harrisburg exited receivership and closed on tax-anticipation notes, its first debt deal since 2010. Also in March, the authority closed on a $2 million line of credit with M&T Bank Corp. for a sewer treatment plant upgrade.