Harrisburg Mayor Linda Thompson Friday vetoed the Pennsylvania capital city’s $65 million fiscal 2010 budget because it doesn’t include current-year debt service obligations to bondholders on $282 million of outstanding incinerator debt.

Assured Guaranty Municipal Corp. insures $195.5 million of outstanding Harrisburg Authority resource-recovery facility revenue bonds.

“Any mayor that signs a bill that doesn’t budget for its debt obligations certainly is in violation of debt act ordinances and also its own city ordinances,” Thompson said Friday during a press conference. “So the failure to budget and allocate funds for the city’s guarantee of the Harrisburg Authority’s debt act violates the debt act.”

The spending plan now heads back to the City Council. The seven-member body could override Thompson’s veto with a supermajority vote of five yeas.

City Council clerk Beth Ann Gabler said the council would have needed to receive the vetoed budget by Friday in order to act on it at its next meeting, set for Tuesday.

“It has to sit for three days [after receipt] before council can take action,” Gabler.

The City Council passed the budget on Feb. 13 with all members approving the plan. The proposal did not include allocations of $32.7 million to meet debt obligations. That $32.7 million includes $19.7 million of principal and interest payments and derivative costs, and $13 million to replenish the debt-service reserve fund, according to John Frey, senior managing consultant at Public Financial Management Inc., the Harrisburg Authority’s financial adviser.

There is also a $35 million working capital loan that Bear, Sterns & Co. extended in 2007 that will come due in December. Officials anticipate refinancing that loan later this year, Frey said.

Daughin County, where Harrisburg is located, also guarantees a portion of the incinerator debt. The county has budgeted $40.7 million in its fiscal 2010 budget for its incinerator debt obligations, according to Chad Saylor, chief of staff for the Dauphin County Commissioners.

Of the $19.7 million of 2010 debt service costs and swap payments, the city is solely responsible for $10.5 million. The county and the city are both on the hook for the remaining $9.2 million.

Of the $10.5 million that the city must pay for on its own, there are $4.6 million of debt service reserve funds that could be used to meet those obligations, Frey said. That leaves the city without a source of payment on $5.9 million of debt service costs this year.

In looking at Harrisburg’s $5.9 million obligation, its next payment to bondholders is a $425,000 payment due May 1 on Series 2002A bonds, according to Frey. It will owe another $315,000 on June 1 to investors of Series 2003F bonds.

Additional 2010 payments to investors include $2.2 million due Sept. 1 on Series 1998A bonds and Series 2003A, B, and C bonds; $1.2 million due Nov. 1 on Series 2002A bonds; and $1.7 million due Dec. 1 on Series 2003F bonds.

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