HARRISBURG, Pa. Harrisburg’s outgoing mayor implored her successor stay out of the bond market for a while, even as Pennsylvania’s capital city begins to regain credibility in the capital markets.
“Bask in the laurels of being debt-free,” Linda Thompson said Wednesday in an interview at City Hall.
“It’s like paying off your credit cards. You’re free of the debt, so why take on new debt right away? My advice to the new mayor is to not go into the bond market yet. Build a strong business environment. Create jobs and create incentives for innovative businesses here.”
Harrisburg for several years has been a pariah in the capital markets, saddled with more than $600 million of debt that it cannot pay. More than half of the debt is from bond financing overruns to an incinerator retrofit project.
On Thursday, state-appointed receiver William Lynch is scheduled to present the “Harrisburg Strong” financial plan to the Commonwealth Court of Pennsylvania. The elaborate plan calls for erasing debt and balancing the city’s budget.
The latest praise for the 357-page plan came Wednesday from Wells Fargo Securities, which said that cooperation among various government levels separated Harrisburg apart from fractured Detroit, which filed for bankruptcy on July 18.
“We see the plan as finally reflecting intergovernmental collaboration among the city, the state and the county, as well as unions and creditors in ways that are not yet visible in Detroit,” senior analyst Natalie Cohen wrote.
Thompson, who successfully fought a City Council bankruptcy filing late in 2011 when a federal judge invalidated it, is relieved that Harrisburg will apparently stay out of Chapter 9.
“In bankruptcy court, people’s pensions can get cut in half,” she said in reference to the outcome of the Central Falls, R.I. bankruptcy and proposals in the ongoing Detroit bankruptcy. “People worked 30 to 40 years. They deserve their full pensions. I don’t want to see bankruptcy destroying the lives of people.”
She also worried about spending millions in bankruptcy court, a problem staring at Detroit. “My heart weeps for Detroit,” she said.
Lynch’s recovery plan for Harrisburg includes the sale of the incinerator and lease of parking assets, creditor haircuts and revenue streams to remove stranded debt, and calls for the 49,000-population city to have a balanced budget for four years.
Measures such as stretching out repayment of $17 million of defaulted general-obligation bonds, the transfer of water and sewer operations to the Harrisburg Authority and early repayment of Metro Bank through proceeds from the sale of Wild West artifacts are designed to re-establish Harrisburg’s credit strength.
“Private banks are nibbling at us,” Lynch said recently in a separate interview.
Thompson, who has had her share of battles in 12 years in a highly divisive city the last four as mayor and the eight before that as a councilwoman relishes the good news. “No one is more joyful than I am, for many reasons,” she said inside her second-floor office.
The mayor has a major supporter in Lynch.
“She’s far better with numbers than I am,” he said. “I have a lot of respect and a certain amount of affection for her. Mayor Thompson is handing over a city in far better shape than what she inherited. She inherited an awful situation, a disaster.”
Thompson lost her re-election bid in the Democratic primary to businessman Eric Papenfuse, who will face city controller and Democrat-turned-Republican Dan Miller in November. Independent Nevin Mindlin is challenging in court to remain on the ballot.
Thompson, the city’s first female mayor and first African-American mayor, smiled when asked about critics who have called her ill-tempered, divisive, paranoid, and overly religious.
“I was portrayed as this crazy black female who had everyone praying in her office. It was like Jesus being led to the slaughterhouse,” she said. “Everyone wanted me to respond. But that would have taken me away from my focus. I saw the big picture.”
