Financially strapped Harrisburg wants all sides, including bondholders, to make concessions, the mayor of Pennsylvania’s capital city said Wednesday.
“We’ve asked all of our creditors to come to the table. Let’s roll up our sleeves and bang it out,” Linda Thompson said at the Bloomberg State and Municipal Finance Conference in New York.
Harrisburg, straddled with about $310 million of bond debt related to a costly incinerator retrofit project, faces a possible state takeover. Recent legislation prompted a declaration of fiscal emergency from Gov. Tom Corbett, who is interviewing applicants for a receiver.
The city, meanwhile, has until Nov. 14 to craft a financial recovery plan acceptable enough for state officials to ward off receivership.
On Monday, Thompson, the City Council, and members of the state Department of Community and Economic Development will meet privately with bondholders, and major creditors Assured Guaranty Municipal Corp., Dauphin County and Covanta Energy Corp.
“We all have to share in the pain,” said Thompson. “A mayor’s gotta do what a mayor’s gotta do. I don’t see anyone outside the office with a check for $310 million. The state, the county, AGM and the city of Harrisburg all have to make concessions. Let’s all be big boys and girls in the room.”
Thompson, who has been at odds with the City Council, said she is optimistic that Harrisburg can avert a takeover. “The governor has enough of his own problems; he doesn’t want our city,” she said.
But, she added, “I think the City Council knows the pressure is on them.”
Three times the City Council — all by 4-to-3 votes — has rejected a financial recovery plan proposed under the state’s Act 47 plan for distressed communities, into which Harrisburg enrolled last December. On Oct. 11, the council filed a Chapter 9 bankruptcy petition, which Thompson, the state and bondholders oppose.
Judge Mary France of the U.S. Bankruptcy Court for the Middle District of Pennsylvania in Harrisburg is scheduled to rule on the legitimacy of the bankruptcy filing on Nov. 23.
The date could collide with the timing for imposition of a state receivership.
“Bankruptcy would create long-term ripple effects for the state, the region and the city,” Thompson said. “We need capital and we need bonding to go forward.”
Thompson, an in interview after the panel discussion, denounced accusations by critics who said that her recent filing seeking bankruptcy court approval for vendor payments was posturing intended to generate fears about the bankruptcy petition.
“I’m not a bankruptcy attorney or expert but this is a false starter,” she said. “We were fine with our vendors. There was no problem with payments up to 90 days late. But 48 hours after the bankruptcy petition, our vendors are suddenly saying they want cash on delivery. There’s your story.”