Harried in Harrisburg

According to a state official, the state’s capitol city, Harrisburg, has enough cash to last through November. The official noted that delaying payments to some vendors could help Harrisburg make it through the end of the year. The official, Fred Reddig of the Department of Community and Economic Development, which oversees the state’s distressed communities, also said the city may issue some tax anticipation notes (TANs) in January if banks are willing. Mr. Reddig said Harrisburg, which remains under state Senate is scheduled to begin hearings on the incinerator bond financings tomorrow.

Harried in Harrisburg

According to a state official, the state’s capitol city, Harrisburg, has enough cash to last through November. The official noted that delaying payments to some vendors could help Harrisburg make it through the end of the year. The official, Fred Reddig of the Department of Community and Economic Development, which oversees the state’s distressed communities, also said the city may issue some tax anticipation notes (TANs) in January if banks are willing. Mr. Reddig said Harrisburg, which remains under state receivership, will have a budget gap of about $15 million by year’s end: “Many municipalities need to address that cash-flow deficit early in the year and that’s where the Tan would come into play, in January, to address those liabilities that are brought forward. The Tan would deal with the deficit in the early couple of months” of 2013.” Harrisburg has about $320 million of bond debt that it cannot pay because of financing overruns to an incinerator retrofit project. The receiver’s office has also issued requests for proposals to lease or acquire the sewer and wastewater systems, and is negotiating exclusively with the Lancaster County Solid Waste Management Authority over the incinerator. Harrisburg’s largest vendor is Highmark Inc. of Pittsburgh, which provides non-prescription coverage to municipal employees. Although the city owes Highmark roughly $1.5 million, the carrier has not threatened to shut off coverage. To which Reddig warns: “The point is that the city needs to be in communication with their major creditors, much the same way you or I would need to talk with a creditor if we couldn’t make a mortgage payment. If you communicate with a vendor, it is less inclined to take action. If you let the lender know, it provides the lender some level of comfort.” Meanwhile, Harrisburg’s chief operating officer, Ricardo Mendez-Saldivia, reported that the city’s accounting firm Trout, Ebersole & Groff LLP has stopped work on the city’s 2010 and 2011 audits because the city has yet to pay the firm. Mr. Mendez-Saldivia reports that the 2010 audit is 90% finished, but only minimal work has been done on 2011. Tomorrow, the Commonwealth Court of Pennsylvania will hear oral arguments about the City Council‘s appeal of an order by Lynch to double the earned-income tax to 2% from 1%. In addition, the Pennsylvania Senate is scheduled to begin hearings on the incinerator bond financings tomorrow.

Harried in Harrisburg

Judge Bonnie Leadbetter of the Pennsylvania Commonwealth Court last week agreed to reconsider the bitterly contested 1 percentage point increase in the earned income tax she had ordered last month as part of the city’s receiver’s Chapter 9 recovery plan. But in response to a joint plea on behalf of the receiver, city council, and mayor; the judge has granted a reprieve.

Harried in Harrisburg

Harrisburg bankruptcy receiver William Lynch this week announced Harrisburg would miss $3.4 million worth of GO bond interest payments due tomorrow. The payments involve Series D bonds and Series F notes issued in 1997, both refundings, according to an official statement released at the time. They totaled $51.5 million. This would mark a second missed payment, the other, a $5.3 million payment, was due last March 15th. Harrisburg will, instead, use the funds to pay salaries. The missed payment comes as the city awaits the expiration of its state-imposed restriction barring filing for Chapter 9 federal bankruptcy protection on Nov. 30th. The city is overwhelmed with $320 million of debt, most of which is connected to its incinerator retrofit project, but also by intracity disputes, not to mention the different perspectives from the state with regard to priorities between local employees, local taxpayers, and bondholders—or, as City Council member Brad Koplinski stated: “While we never want to not pay our debts, it is vital that we pay the hard working employees of this city who maintain the health, safety and welfare of our citizens.” Meanwhile, Mr. Lynch, who is projecting a $12.6 million structural deficit, said last month that Harrisburg could run out of money by the end of September. The receiver’s financial recovery plan includes increasing the city’s earned-income tax to 2% to 1%, a plan to which the City Council has objected—and an issue the Commonwealth Court of Pennsylvania will revisit next month—albeit, as one person noted: “Increasing the property tax is like squeezing blood out of a rock…People don’t have the money. Harrisburg is poor and has been poor for a long time.”