Harrisburg, Pa. receivership officials and the public works agency buying the city’s incinerator hope to sell bonds next week to finance its purchase.
The sale of the trash-burning facility is a major component of the financial plan intended to keep Pennsylvania’s capital city out of bankruptcy.
“The [tax-exempt revenue] bonds will be processed Dec. 4 and Dec. 5,” a representative for the Lancaster County Solid Waste Management Authority said Monday.
The authority, based in Lancaster, Pa. in a county abutting Harrisburg’s Dauphin, expects to close the acquisition on Dec. 16. It will rename the trash-burner, which sits four miles southeast of downtown Harrisburg, the Susquehanna Resource Management Complex.
“The preliminary stuff on the incinerator has gone out,” the city’s state-appointed receiver, William Lynch, said in an interview. “We think that finally getting the incinerator sale done will lift the city of an enormous burden.”
According to a preliminary official statement available on the Lancaster authority’s website, the sale will consist of $108.3 million of Series 2013A bonds and $24 million of Series 2013B bonds.
Guggenheim Securities, Janney Montgomery Scott and Wells Fargo Securities are the underwriters. Both series have a final maturity date of Dec. 15, 2033.
The statement says Standard & Poor’s rates the Series A bonds AA-minus and the Series B bonds AA. The latter tranche has a $24 million guarantee from Dauphin County.
S&P cited many strengths in its presale report on the Series A bonds, including the authority’s “historical competency to operate, maintain and financially manage a waste-to-energy facility.
“Tempering these strengths, in our view, are potential challenges associated with the transition and integration,” S&P added.
“Our stakeholders are very supportive and gave us a vote of confidence in our ability to pull it off. It’s a solid business plan,” chief executive James Warner said in an interview in Lancaster with The Bond Buyer two months ago.
Lynch and his team, which include financial advisor Steven Goldfield of Public Resources Advisory Group and lead attorney Mark Kaufman of McKenna Long & Aldridge LLP, want to price the bonds for the incinerator sale and a $260 million, 40-year lease of parking assets -- upon which the financial plan also hinges -- while interest rates remain low and before the city encounters another expected cash-flow crunch in December or January.
Lynch’s team would prefer to hold both bond sales at roughly the same time.
Harrisburg is on the hook for roughly $365 million of incinerator bond financing that it cannot pay and about $600 million in debt overall.
The city began to default on incinerator bond payments in 2009. Dauphin County and bond insurer Assured Guaranty Municipal Corp. have been making the payments since. Harrisburg went into receivership late in 2011 after a federal bankruptcy judge rejected the City Council’s attempt to file for Chapter 9 over the mayor’s objection.
The U.S. Securities and Exchange Commission in May said Harrisburg misled investors about its deteriorating finances from 2009 to 2011, although it neither fines nor prosecuted any individuals. Its charges are the first citing a city for not submitting disclosures to the Municipal Securities Rulemaking Board’s EMMA website.
Pennsylvania Attorney General Kathleen Kane’s office confirmed in August that it is investigating incinerator bond transactions.
Two actions pivotal to the parking transaction are scheduled for Tuesday. The Pennsylvania Economic Development Financing Authority’s board is expected to approve the transaction during the day, while the Harrisburg Parking Authority plans a final vote in the evening.
“As the plan provides, certain of the proceeds from the parking transaction goes to the city to address its structural deficit and for economic development, infrastructure improvements and to initiate an [other post-employment benefits] trust,” said Kaufman, co-chair of McKenna Long’s municipal reform and innovation practice.
Harrisburg First is a consortium that includes Guggenheim Securities, Piper Jaffray & Co., Standard Parking Corp. and Trimont Real Estate Advisors.
Trimont replaced AEW two weeks after the latter pulled out last month. AEW’s withdrawal forced a delay in the bond sales, as did the rise in interest rates over the summer.
Other provisions of the recovery plan, which Commonwealth Court of Pennsylvania Judge Bonnie Brigance Leadbetter approved on Sept. 19, include four years of a balanced budget and other measures designed to restore Harrisburg’s reputation in the capital markets.
