Dauphin County, Pa., Commissioners Wednesday approved a contingent $34.7 million loan from PNC Bank to pay off Harrisburg Authority incinerator notes that will come due on Dec. 15.

The bank loan would be used to repay Series 2007C and 2007D taxable zero-coupon notes if the authority or the city of Harrisburg fail to meet the debt payment. The authority issued the notes and Harrisburg is first guarantor.

The authority and Pennsylvania’s capital city this year have not made debt-service payments on the incinerator notes. Dauphin County, where Harrisburg is located, is co-guarantor of the notes.

“The action taken by the county will serve as refinancing of the 2007C and D notes, in the event the city fails to do anything before the Dec. 15 deadline,” commissioner Jeff Haste said in a statement. “Our action [Wednesday] is in response to the inaction of the city. Should the city to fail to work toward a solution before the looming $34 million payment is due Dec. 15, we need to take action and refinance it — something the city has yet to do — to protect the county’s financial standing.”

PNC Bank would extend a loan to the county and defer the principal until 2012. The county will pay $700,000 to $800,000 per year in interest payments on the bank loan, according to Dauphin County spokeswoman Amy Richards.

The authority has $282 million of outstanding incinerator debt. Harrisburg guarantees all of the debt while the county is second guarantor on a portion of the incinerator bonds. Assured Guaranty Municipal Corp. insures much of the incinerator bonds. It does not insure the Series 2007C and Series 2007D notes.

TD Bank NA, trustee of the incinerator bonds, and Assured Guaranty on Sept. 13 filed suit against the city and the authority. They are seeking a receiver for the incinerator debt and a court order to require the city to meet its obligations.

Separately, the city has yet to identify how it will pay $305,952 of debt service due on Harrisburg Redevelopment Authority bonds on Nov. 15 that the city guarantees. The payments include $206,927 on Series 2005 Metro Bank Park stadium bonds and $99,025 on Series 2006 lease revenue notes. The city has $179,000 in a debt service fund for the Series 2005 stadium bonds.

Chuck Ardo, spokesman for Mayor Linda Thompson, said that the city is exploring all of its options in meeting the Nov. 15 payment. In September, Gov. Edward Rendell helped Harrisburg avoid a default on its general obligation debt by speeding-up state payments to the city so it could pay $3.3 million to bondholders on Sept. 15. Ardo said the city does not anticipate a repeat from state. In addition, Pennsylvania’s distressed communities program, called Act 47, has limited funds.

“I would think that that’s unlikely,” Ardo said. “The state program really doesn’t have the funding that would be required. I think that if we are able to get any funding from the state, it would be very limited.”

Thompson last month applied to enter Harrisburg into Act 47. State officials are reviewing that request.

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