Harrisburg, Pa., Parking Bonds Junk Amid Dispute

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WASHINGTON – A dispute between Harrisburg, Pa., city and parking officials over payments continues amid S&P Global Services' downgrade to junk bond status of bonds that funded a long-term parking lease.

S&P lowered the Pennsylvania Economic Development Association – Capital Region Parking System two notches, to BB-plus from BBB.

"The downgrade reflects the parking system's inability to meet its rate covenant based on actual results for the past two consecutive years [2014 and 2015]," S&P said in a July 7 statement.

The bonds were offered in 2013 as part of a $286 million offering that helped underpin of a recovery plan to keep Pennsylvania's 49,000-population capital out of bankruptcy. The lease included both garage and street spaces.

Mayor Eric Papenfuse wants full payments to the city, while parking officials want to defer the payments, citing lower-than-expected revenues despite the state having leased two-thirds of the off-street spaces.

The three-part offering included bonds guaranteed by Dauphin County and wrapped by Assured Guaranty.

S&P said the downgrade also reflects the parking system's probable difficulty meeting the rate covenant this year.

Alan Schankel, a managing director at Janney Capital Markets in Philadelphia, said parking rate increases would merely nibble at the margins.

"Rate increases may be difficult since the service area has low wealth levels and the state portion of the agreement, which accounts for 45% of system revenues, is not subject to increases beyond those included in the agreement," he said.

Some critics of the state-appointed receivership have cited the parking revenue problems in repeating that bankruptcy would have been a better option, according to bankruptcy expert Juliet Moringiello.

"I'm not sure that would have made any difference, because the same people who monetized the parking system outside of Chapter 9 would have done so inside of Chapter 9," Moringiello said at Tuesday's Brookings Institution municipal finance conference in the nation's capital.

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