Regional News

Harrisburg City Council Approves Debt Service Payment

HARRISBURG, Pa. - The Harrisburg City Council Tuesday night unanimously approved the transfer of $3.3 million to allow the city to meet a debt-service payment due today to bondholders of Series 1997D and Series 1997F general obligation bonds.

The council also created a quorum on the Harrisburg Authority board when it approved another board member for the agency.

It was a sometimes heated and active meeting as Councilman Brad Koplinski’s attempts to introduce a resolution that would enable the council to hire a bankruptcy lawyer failed. City Solicitor Phil Harper determined that Koplinski could not bring forth new business beyond a certain time during the meeting.

The decision to appoint another member to the authority board drew applause from the crowd and a sigh of relief after the council voted six-to-one to make Westburn Majors the authority’s newest board member. The board has not had sufficient members for a quorum since May.

The debt service transfer came as Harrisburg officials had said the city was not going to make its GO debt service payment. Gov. Edward Rendell Sunday announced that the state would speed-up payments already pegged for Harrisburg so that it could avoid default.

City finance director Bob Kroboth, during the meeting, confirmed that the city on Tuesday received those funds via wire transfer and that the city will meet its obligations to bondholders today.

“There was approximately $3.6 million of wire-transfers that took place [Tuesday] and in so doing, that allows the administration to make a $3.29 million GO bond payment [this] morning,” Kroboth said.

Mayor Linda Thompson addressed the council at the beginning of the meeting. She urged the members to consider her board nominations and also approve $850,000 of state funds — including $500,000  million that the city will have to pay back — to pay Scott Balice Strategies LLC for financial advisery services. Thompson selected the financial adviser last month to help the city develop a financing plan.

The council opted to send the resolutions detailing the use of the $850,000 to committee. In order for Scott Balice to receive those funds, council would have to approve the resolutions. It would not weigh in on the actual contract with Scott Balice, Council President Gloria Martin-Roberts said after the meeting. The two government seats that would sign off on the contract are Thompson and City Controller Dan Miller. It is unclear whether Miller would sign off on the contract. In local media reports, he has questioned the selectiom process used to retain Scott Balice.

The Harrisburg Authority needs to have a functional board in place as it faces litigation and fiscal instability. It does not have enough revenue to make principal and interest payments on $282 million of outstanding incinerator bonds, which the city guarantees.

TD Bank NA, trustee for the bonds, and Assured Guaranty Municipal Corp., insurer of the debt, sued the authority and the city on Monday. The parties are seeking a receiver for the bonds and a court order to make the city pay its obligations. Harrisburg’s fiscal 2010 budget does not include incinerator debt-service payments. Fiscal 2010 began Jan. 1.

The authority has used debt-service reserves to pay bondholders. Dauphin County, co-guarantor of much of the incinerator debt, and Assured Guaranty have also paid investors.

While the council’s approval of Majors' appointment to the authority’s board broke the political stalemate regarding board member appointees, the community is still divided over how to tackle the outstanding incinerator debt and the city’s fiscal challenges.

Thompson, Roberts and authority officials would like the city to map out with Scott Balice a debt-restructuring plan that may include a potential sale or lease of city assets. Conversely, some city council members oppose spending money on outside financial advice if the end result would make bond investors whole while the city’s essential services are suffering. Thompson last week proposed closing a fire station to help cut expenditures.

Instead, the council members who oppose the mayor's plan believe that the city should also examine a possible bankruptcy filing along with other options. Immediately before Roberts requested a motion to adjourn the meeting, Koplinski attempted to introduce a new resolution that would allow the council to hire bankruptcy attorney J. Gregg Miller. Miller represented Westfall Township in its bankruptcy filing last year. Westfall is located in northeastern Pennsylvania.

Harper nixed Koplinski’s attempt to bring the resolution forward.

“We’re out of time in the meeting where the conduct of new business takes place,” Harper said.

Afterwards, council members Wanda Williams and Eugenia Smith said they would have voted in favor of hiring a bankruptcy lawyer. Williams, Smith, and Koplinski all said that their desire to seek bankruptcy advice does not mean they support an actual bankruptcy filing at this time. They stressed that other entities have legal counsel—the city, the authority, TD Bank, and Assured Guaranty — and that the city council should also have such professionals at its disposal.

Koplinski said that Miller “has the expertise to be able to protect our citizens, to protect their public safety, to protect their families’ financial interest, because that’s really what’s at stake here in this issue in this concern — Main Street vs. Wall Street.”

After the meeting, Roberts objected to the idea of spending money on a bankruptcy attorney and insisted that the focus should be crafting a fiscal strategy with Scott Balice in order for the city to be able to make good on its debts and get back on a more stable fiscal path.

“We’re sending the wrong message to the people that we owe,” Roberts said.

Koplinski said he would seek a special legislative session in order to push the initiative again. One issue is how the cash-strapped city would be able to afford a bankruptcy lawyer. After the meeting, Koplinski said the city could include those costs in its fiscal 2011 budget. That spending plan, which the mayor has yet to propose, would take affect in January.


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