Harrisburg Enters Pennsylvania's Act 47 Program

NEW YORK - Pennsylvania Wednesday announced that its cash-strapped capital city, Harrisburg, is financially distressed and will work with an outside financial adviser to craft a fiscal recovery plan under the state’s distressed municipality program, Act 47.

Austin Burke, Secretary of the Department of Community and Economic Affairs, said Harrisburg met two criteria for placement within the Act 47 program — the city has failed to meet its debt obligations and outstanding claims surpass 30% of the city’s budget with no ability to renegotiate.

“This determination will bring objectivity and financial expertise to a city that desperately needs a path to fiscal recovery,” Burke said in a statement. “Taxpayers, creditors and investors will take comfort in knowing that Harrisburg is headed in the right direction. We hope this renewed confidence triggers solutions to help the city meet its pending obligations.”

Burke will appoint a recovery plan coordinator for Harrisburg within 30 days. The outside consultant will then have 90 days to develop a financial stabilization plan with Mayor Linda Thompson, the city council, and the DCEA.

“This is an important first step on the city’s road to fiscal recovery,” Thompson said in a statement. “There will be difficult choices to be made by the city’s leaders as we craft a comprehensive long term recovery plan. But, we have an opportunity to become the model for comeback cities and it is my intention to seize that opportunity.”

Harrisburg, which does not carry underlying credit ratings, has $282 million of outstanding incinerator debt that it has not made payments on in 2010. Thompson’s fiscal 2011 budget proposal does not include incinerator debt-service payments. The Harrisburg Authority sold the bonds but the facility has not been able to meet principal and interest payments. Dauphin County, co-guarantor of the bonds and Assured Guaranty Municipal Corp. have been making payments to bondholders.

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