The Harrisburg Authority will miss a $3.2 million June 1 payment to bondholders of incinerator debt sold in 2003 that helped finance upgrades to the Pennsylvania facility.
The payment deadline affects Series 2003D, E, and F bonds. In addition, the authority will not meet three June 1 derivative payments that total approximately $860,000. Together, the debt service costs and the swap payments total $4.09 million. The authority has $282 million of outstanding incinerator debt, all of which the city of Harrisburg guarantees.
The city will not make the June 1 payments, Michael Holmes, chief of staff for Mayor Linda Thompson, wrote via email.
The agency does not have sufficient operating revenue to repay the debt.
Dauphin County, where Harrisburg is located, guarantees much of the bonds. Assured Guaranty Municipal Corp. insures $195.5 million. Debt service reserve funds will pay the $2.6 million due on the Series 2003D bonds, said Michele Torres, the authority’s executive director.
Dauphin County guarantees the 2003E bonds, which have a June 1 payment of $322,000. Torres said the reserve fund for those bonds is depleted.
The county’s fiscal 2010 budget includes its incinerator debt obligations. AGM insures the 2003E bonds, according to Ashweeta Durani, spokeswoman for AGM.
The county does not guarantee the 2003F bonds. Torres said the $314,000 June 1 payment due on the bonds will be paid from a surety policy supplied by AGM, which totals $369,000, she said.
Both the city and the county guarantee the authority’s three derivatives with counterparty Royal Bank of Canada. Swap payments of roughly $860,000 are due. AGM would be responsible for these payments if the county failed to pay, Durani said.
Harrisburg did not allocate for incinerator debt-service costs and swap payments in its $64.7 million budget, for the year that began Jan. 1. The authority, the city, the county, and AGM have been working for nearly two months on a forbearance agreement that would give the city time to craft a long-term repayment plan.
That plan may include the selling of city assets to help pay down the incinerator debt, including $34.6 million of zero-coupon notes due Dec. 1 on a working capital loan from Bear, Stearns & Co. in 2007.
Some city officials have said filing for bankruptcy protection is a possible alternative for Harrisburg. Thompson and City Council president Gloria Martin-Roberts oppose a bankruptcy filing.
In an April 30 report on Harrisburg, Bank of America Merrill Lynch stated its belief that a bankruptcy filing for the city is “unlikely” and that AGM’s dominant market position “should engender confidence that the guaranteed resource recovery debt service payments will remain current.”
