Scott Balice Strategies LLC will advise Harrisburg, Pa., on the refinancing of $282 million of Harrisburg Authority incinerator debt as the agency continues to operate without a board.
The authority's professional liability insurance expires Aug. 23, but a political dispute between Mayor Linda Thompson and the City Council has left its board without the quorum needed to renew that protection.
Authority executive director Michele Torres late Tuesday afternoon was in a conference call with the city regarding the issue of the professional liability insurance.
The Harrisburg Authority only has two board members right now and needs three for a quorum.
The City Council rejected Thompson's two board appointees Monday evening by identical votes of four to three.
Thompson Tuesday announced her administration's selection of Chicago-based Scott Balice as the city's financial adviser to help develop a strategy for paying down the $282 million of outstanding incinerator bonds. Scott Balice beat out 16 other consulting firms.
In its proposal to the city, Scott Balice suggested a monthly retainer of $20,000 for up to 65 hours and hourly fees thereafter of $275. The proposal states that the firm is willing to negotiate a fee structure. City spokesman Chuck Ardo said the administration aims to reduce those proposed fees.
The consulting team includes the Government Finance Officers Association, law firm Bracewell & Giuliani LLP, where former New York City Mayor Rudolph Giuliani is partner, and real estate firm Jones, Lang LaSalle. Hourly fees beyond the monthly retainer include $225 for GFOA and $275 for Jones Lang LaSalle. Bracewell & Giuliani's hourly fee is $600, though "Rudolph Giuliani will waive all fees for the experience or leadership he brings to this assignment," according to Scott Balice's proposal.
"We are excited by the opportunity to serve the city of Harrisburg and are ready to hit the ground running," Lois Scott, president of Scott Balice, said in a statement. "These are tough economic times all across the country and we have a wide breadth of experience in our work evaluating the city's options and steps needed to execute them."
Scott Balice will help Harrisburg craft a debt restructuring plan, which may include a possible lease of the city's parking garage and other assets. The consulting firm is currently helping Pittsburgh evaluate a potential 50-year lease on its parking garages as that city seeks to address its pension liability.
"The Scott Balice Strategies team has the experience and expertise to advise the city at this critical juncture," Thompson said in a statement. "They bring a team of highly qualified professionals who will bring a fresh set of eyes to holistically evaluate the many options available to address the city's challenges and prioritize their implementation."
The Harrisburg Authority does not have sufficient revenue to pay the incinerator bonds. The city, which guarantees all of the debt, did not include incinerator debt-service costs in its $64.7 million budget for fiscal 2010, which began Jan. 1.
Dauphin County, where Harrisburg is located, guarantees most of the debt and has budgeted for its obligations. Officials have also tapped into debt-service reserve funds, which they expect to use to cover a $2.2 million payment to investors due Sept. 1. Assured Guaranty Municipal Corp. insures much of the debt and has made payments to bondholders in the absence of debt-service reserve funds.
State, city, and county officials continue to negotiate with Assured Guaranty on a forbearance term sheet. Those discussions have been ongoing since the spring.
At the same time, the authority has been working for nearly three months without a board since the Pennsylvania Supreme Court determined that the mayor nominates board members to the Harrisburg Authority — not the City Council. Board members Cluck and Marc Kurowski were reappointed after that ruling. The council has asked Thompson to renominate all of its prior board appointees.
One key issue is the professional liability insurance that expires Monday.
"There is a replacement policy ready to go," Cluck said. "Unfortunately, without a board the authority cannot bind or pay for that coverage. However, historically the city used to bind the coverage."
Cluck said a decision needs to be made by Friday for the authority to have continuous coverage. Last week, Cluck said he and Kurowski would resign if the City Council failed to add another board member at its Monday night meeting.
"I still believe the city can bind the coverage and enable the professional staff to continue to work," Cluck said. "If they do not, I do not know what I'm going to do. My intention was to resign [but if this is] just a matter of political gamesmanship by the city administration, I'm going to reconsider that thought."
