The Harrisburg Authority Monday night is set to vote on allocating up to $3 million to the city of Harrisburg that, if approved, would give Pennsylvania’s capital a much-needed liquidity boost.
Authority officials are reviewing whether to direct a portion of a $9 million payment the utility agency received earlier this year for swap terminations. The $3 million would flow into the city’s water fund. The administration could then use the money as it sees fit.
“There are funds in a contingency account as a result of the termination of water swaps in February of this year,” said authority board member William Cluck. “And there may be a legal avenue to transfer possibly up to $3 million to the city’s water fund.”
Harrisburg could use the help. Making payroll and debt-service payments have been difficult, as the city is strapped for cash. It also has $282 million of incinerator bonds it can’t repay. The authority issued the debt and the city guarantees it.
Harrisburg may enter into the state’s distressed communities program, called Act 47. State officials are reviewing Mayor Linda Thompson’s application to the Act 47 program.
In addition, Cravath, Swaine and Moore LLP will begin reviewing Harrisburg’s finances to advise the city on a potential Chapter 9 bankruptcy filing or entering into Act 47. The firm is working on a pro-bono basis.
“The windfall would certainly be a pleasant surprise,” Thompson spokesman Chuck Ardo said in an e-mail. He said the money could be directed toward the city’s payroll and bills from vendors as well as other obligations.
Separately, the authority is seeking its own legal counsel to examine how a possible Chapter 9 filing by the city or its potential entrance into Act 47 would affect the water system. The utility has an “open loop” fiscal structure where surplus water funds go to the city.
The outside legal advice will help the authority provide information to Moody’s Investors Service. Moody’s on Oct. 4 placed $68.4 million of the authority’s water bonds on review for a possible downgrade after Thompson’s applied to the Act 47 program. It rates the bonds A1.
Responses to the authority’s request for proposals for legal services are due Friday. Moody’s will conclude its review by early January.