The disclosure that Harrisburg, Pa., must repay bond insurer Ambac Assurance Corp, roughly $30 million of additional interest “more than confirms the need” for scrutiny of the city’s financial recovery plan, city Controller Dan Miller said.
Miller’s comments follow revelations in court documents that the city must pay Ambac nearly $125 million -- well past the original estimate of $95 million -- over 20 years to cover past-due general obligation debt and some capital projects, including $51.6 million the city borrowed in 1997 to refinance debt on projects that included a Civil War museum.
Miller, a mayoral candidate, filed a 14-page objection to receiver William Lynch’s plan with the Commonwealth Court of Pennsylvania. Justice Bonnie Brigance Leadbetter on Monday formally confirmed the plan, titled “Harrisburg Strong,” after approving it from the bench after a Sept. 19 hearing. The court allows for the filing of objections within 30 days of the hearing.
In addition, other housekeeping matters such City Council approval of transfers remain. Lynch and his team want to price the bonds while market conditions are still favorable.
But Miller, the lone mayoral candidate to favor a city bankruptcy filing, said red flags about long-term obligations still exist.
“Placing an additional $28 million on the city’s beleaguered taxpayers is ample proof that the plan is tailored for the benefit of creditors at the expense of the city’s long-term interest. It also mocks the notion that the plan allows Harrisburg to re-enter the bond market anytime soon,” said Miller, who lost the Democratic primary to businessman Eric Papenfuse and will run in November as a Republican.
In his objection, Miller said the plan overstates total revenue and insufficiently addresses a potential $7.4 million annual expense, beginning in 2017, for the downtown Verizon Tower at Strawberry Square or an annual $11.7 million for other post-employment benefits, or OPEB. “Both of these items have significant negative budget consequences,” Miller said.
The original bonds, issued in November 1997, include $24.9 million of Series D general obligation refunding bonds and $26.6 million of Series F notes. Ambac also insures the city’s GO bonds. Harrisburg has missed four straight GO payments totaling $17 million, including one due on Sept. 15.
A message was left with an Ambac press officer seeking comment.
Lynch and his financial advisor, Steven Goldfield of Public Resources Advisory Group, touted the plan’s return-to-capital-markets underpinning in an interview with The Bond Buyer two weeks ago. “Private banks are nibbling at us,” he said.
Lynch revealed his plan on Aug. 26, one month after announcing that major creditors, which also include Dauphin County and incinerator bond insurer Assured Guaranty Municipal Corp., had reached a consensus. Rising bond interest rates had forced a delay in the agreement.
Lynch’s plan aims to keep the 49,000-population state capital out of bankruptcy and erase more than $600 million of debt, including about $363 million related to bond financing overruns to an incinerator retrofit project.
Central to the plan are the sale of the incinerator to the Lancaster County Solid Waste Management Authority and a leasing of parking assets for up to 40 years.