Harrisburg has finally completed its financial audit for 2009, but the Harrisburg Authority is far from happy.
The public works authority in Pennsylvania’s capital blames the city for Moody’s Investors Service withdrawal last month of its rating on $69.4 million of Series 2008 water system refunding bonds.
“Audits matter. The failure of the city to do their legal duty in 2010 to prepare a 2009 audit has cost taxpayers. It has harmed this authority significantly. It has meant that our water revenue bonds have been de-rated,” board member William Cluck said at Wednesday’s meeting.
Moody’s withdrew the rating after lowering the bonds to Ba3 from Ba1. The downgrade “reflects a narrowing of the water system’s liquidity and heightened risk of a disruption to financial operations given the city’s ongoing financial distress,” it said.
The November downgrade was the second for the water bonds this year. Moody’s in January lowered them to junk status Ba1 from A1.
The Harrisburg Authority also operates the incinerator that has been the focal point of the city’s debt crisis. Water system funds are held separately from other authority operations, including the trash burner.
Cost overruns to a retrofit of the trash burner account for most of the city’s $310 million of debt, which has plunged Harrisburg into receivership. Court records say the city has skipped $65 million in incinerator bond payments.
The authority’s interim executive director, Shannon Williams, told the City Council two weeks ago that failure to complete audits for 2009 and 2010 could hinder the authority’s efforts to refinance the water bonds.
“I would hope that those charged with enforcing [Securities and Exchange Commission] rules take the appropriate action to send a message to our officials that you don’t mess around with this kind of stuff,” Cluck said. “People who invest in bonds and notes rely on this. Frankly, this is unprecedented. It’s not just a question of a political dispute within the administration. It has significant consequences. It was a violation of the law.”
Earlier this year, Mayor Linda Thompson’s office acknowledged that the SEC is examining whether officials provided enough information to bond investors.
Thompson’s finance director, Robert Kroboth, blamed staffing shortages for the delays. Speaking at a recent City Council budget meeting, he said the 2010 audit will begin in February or March and will conclude in about three months.
“I hope we’ll see it very soon, although I have a feeling from the looks on people’s faces that we’re not going to see it for a while,” Cluck said Wednesday.
Cluck also said the authority’s forensic audit into the incinerator financing may be done soon.“The receiver thinks that some of the information in it will be useful in bringing creditors to the table,” he said, referring to Harrisburg’s state-appointed receiver, David Unkovic.
Unkovic this week asked the authority to restart the process for soliciting bids for the incinerator. Four suitors, including neighboring Lancaster County, must resubmit their proposals.
