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Pennsylvania Capital Ponders Bankruptcy

Harrisburg City Controller Dan Miller Says Pennsylvania Capital Should Weigh Bankruptcy.

Harrisburg, Pennsylvania, the capital of the sixth-largest U.S. state by population, should skip a $2.2 million debt service payment due Feb. 1 and consider bankruptcy, City Controller Dan Miller said.

Harrisburg faces $68 million in payments this year in connection with a waste-to-energy incinerator and should weigh Chapter 9 protection from creditors or state oversight through a program known as Act 47, Miller said today. Chapter 9 bankruptcy allows municipalities to reorganize rather than liquidate.

The alternatives are to sell assets such as an historic downtown market; an island in the Susquehanna River that includes the city’s minor-league baseball stadium; and the city’s parking, sewer and water systems, according to a preliminary 2010 budget and an emergency financial plan submitted yesterday.

“What I’m suggesting is we stop paying the debt service until we have a plan or we decide which way to go, in bankruptcy or Act 47,” Miller, a former city council member who became controller this month, said in a telephone interview. “I think it could save our assets instead of selling them.”

Management Partners Inc. of Cincinnati, a consulting firm hired to study the city’s finances, recommended selling assets, raising city inspection and recreation fees, and reopening city labor contracts.

Harrisburg owes a total of $68 million in payments it guaranteed on bonds issued by the Harrisburg Authority for the incinerator and on a $35 million working capital loan for the project.

The city skipped more than $3.5 million in debt service and swap payments last year, prompting draws on reserves and back-up payments by Dauphin County, where Harrisburg is located, which has sued the city to recover its payments.

Harrisburg’s debt was downgraded to high-yield, high-risk junk status by Moody’s Investors Service in October. Moody’s lowered the city’s rating to Ba2 from Baa2, the second-lowest investment grade.
The first thing Harrisburg should do is fire Management Partners Inc. of Cincinnati, for poor advice. The only recommendation from Management Partners that made any sense was reopening city labor contracts.

http://globaleconomicanalysis.blogspot.com/2010/01/pennsylva...

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I would be highly optimistic

about them selling off their primary infrastructure and assets, however I would be worried about who the heck might be buying them. In a free market it would be those who have saved the most capital.

In this "market" it would those who print the most capital :(

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That's

the part that "jumped out" at me, too--but optimism is NOT what I am feeling right now.

"...The alternatives are to sell assets such as an historic downtown market; an island in the Susquehanna River that includes the city’s minor-league baseball stadium; and the city’s parking, sewer and water systems..."

Just who'd be buying the sewer/water systems??? We agree in that respect.

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Cities and Hospitals Do this trick

The city sells the asset (airport or hospital) for a quick cah infusion and then pays a lease to the new owner of x dollars a year.

So it is like a long term loan but the taxpayers are stuck with the tab or loose the asset forever.

The new owners are not benevolent - The taxpayers end up paying more and city hall does not have to make hard decisions.

AMERICA STARTS HERE!

Pennsy state slogan

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RON PAUL 2012

The era of free beer for the unions

In PA may just be drawing to a close.

bump

Thanks for posting.

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