Harrisburg has enough cash to last through November, and delaying payments to some vendors could help Pennsylvania’s capital city make it through the end of the year, according to a Pennsylvania state 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 in January if banks are willing.
Harrisburg, which remains under state receivership, will have a budget gap of about $15 million by year’s end, Reddig said last week at a meeting of the Municipal Financial Recovery Advisory Committee.
“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, according to Reddig.
Harrisburg is saddled with about $320 million of bond debt that it cannot pay because of financing overruns to an incinerator retrofit project.
Reddig said receiver William Lynch’s evaluation team is studying bids from parties interested in acquiring the city’s parking garages.
One company recently withdrew, leaving three interested companies, according to Reddig, who declined to offer specifics regarding dollar amount or timetable.
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. But Reddig urged city officials to keep talking with Highmark.
“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,” Reddig said.
Harrisburg’s chief operating officer, Ricardo Mendez-Saldivia, told the committee that 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.
The 2010 audit is 90% finished, he said, while only minimal work has been done on 2011.
Mendez-Saldivia attributed the problem to a communications snafu.
“We have had an excellent rapport and we believe it can be worked out,” Mendez-Saldivia said.
On Thursday, 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%.
Also that day, the Pennsylvania Senate is scheduled to begin hearings on the incinerator bond financings.
