Cravath, Swaine and Moore LLP will file Thursday its analysis of a potential bankruptcy filing for Harrisburg, Pa., but the City Council may not release that report to the public until next week.
Councilman Brad Koplinski said the New York-based law firm will file hard copies of its analysis to the council on Thursday. The council is set to meet Tuesday evening in a closed executive session with Cravath to pose questions to the firm, according to Koplinski.
The report will detail the pros and cons of a possible Chapter 9 filing and Harrisburg’s different options under the state’s distressed municipalities program, called Act 47. Pennsylvania’s capital city entered into Act 47 in December.
The report comes on the same day that all of the government stakeholders of the Harrisburg Authority’s $282 million of outstanding incinerator debt meet for the first time to discuss a potential sale of the facility. The meeting will include the authority, the mayor’s office, the City Council, Dauphin County officials, and Assured Guaranty Municipal Corp., insurer of the bonds.
Koplinski said that he does not know whether the Cravath report, which he’s been told is “very large,” will recommend that Harrisburg file for bankruptcy. He believes the report should be made public Thursday. Koplinski said the council is debating when to release Cravath’s analysis and anticipates the public will have the report next week. Council President Gloria Martin-Roberts did not respond to an e-mail requesting comment.
“We’ve had an internal struggle within the council to come to that decision and what to do with that,” Koplinski said in a telephone interview. “I believe that we’ll be successful in that Tuesday night or Wednesday morning it will most likely be released. That’s how I think it’s going to go.”
Koplinski has pushed for the city to examine a possible Chapter 9 filing. Mayor Linda Thompson and Martin-Roberts have said that bankruptcy is a last, worst-case option and prefer to look at ways to restructure or pay down the $282 million of outstanding incinerator debt,on which the city has failed to make debt service payments.
Bondholders have been paid from debt service reserve funds and payments from Dauphin County, a co-guarantor of the debt, and Assured Guaranty. In 2010, the city struggled to meet payroll and paid general obligation debt service costs with pension assistance and fire protection payments that the state pays the city. Former Gov. Edward Rendell sped up those payments so Harrisburg could pay its bondholders on time.
Koplinski believes Cravath’s analysis and the council’s discussions with the law firm should be out in the open so that residents can educate themselves on the city’s various options. “I think if it’s an open meeting and transparent, it puts a check on everyone and everyone realizes that the public is always watching, as they should be,” he said. “We’ve got to make some very important decisions and this report is part of it.”
Cravath has been advising the council on a pro-bono basis since November. The firm represents the New York City Off-Track Betting Corp. in its Chapter 9 filing.As part of the Act 47 program, the Novak Consulting Group and other outside professionals are working on a fiscal recovery plan for Harrisburg that it will file to the city in mid-May.
