Harrisburg could gain $60 million by the end of the year as the Harrisburg Parking Authority in December plans to restructure all of its $105 million of outstanding debt and pass new-money proceeds to the city.

Pennsylvania’s capital city guarantees about $86 million of the Parking Authority revenue bonds.

The potential refinancing would remove the city’s pledge from the authority debt. Surplus agency revenue flows into Harrisburg’s coffers.

While the potential $30 million to $60 million from the authority would help the city with its financial problems — including $282 million of incinerator debt on which Harrisburg has not been making debt-service payments in 2010 — it would not resolve the city’s immediate cash-flow issues.

Mayor Linda Thompson is working on how to meet payroll next week. The city faces $662,331 of debt-service payments Nov. 15 on Harrisburg Redevelopment Authority bonds that the city guarantees.

“We hope to be able to make these payments as required,” Thompson spokesman Chuck Ardo wrote via e-mail.

Pennsylvania-based Boenning & Scattergood Inc. will serve as underwriter on the refinancing deal. Pepper Hamilton LLP is bond counsel.

The Parking Authority may hire an outside financial adviser to help work on the sale, according to Tim Anderson, partner at Pepper Hamilton, the agency’s solicitor.

Officials anticipate closing the bond deal by Dec. 31. The sale size will range between $140 million and $200 million and will include refinancing and new-money issuance in two series, one tax-exempt and one taxable, according to the proposed bond resolution.

The restructuring will push certain maturities out to future years.

Anderson said the bulk of the refunding would involve advance refinancings, which could involve negative arbitrage, but “Boenning & Scattergood thinks that they can set this up in a way that works,” he said.

The transaction also includes a new-money portion that would take advantage of revenue collected from certain facilities that have less debt attached to them and anticipated parking-rate increases.

On top of the roughly $105 million of refinancing, the deal will include $30 million to $60 million of new-money proceeds that the Parking Authority would hand over to Harrisburg.

“Some of these facilities have been paid down and there’s free cash flow,” Anderson said. “There will be more cash flow based on rate increases and that will support some additional debt. It’s not just paying off the existing indebtedness.”

The Parking Authority’s debt matures out to 2037, which mirrors the life of the agency. If the city chose to extend the authority’s existence, officials could then issue debt beyond 2037. Boenning & Scattergood believes extending the authority and the debt would generate about $15 million of additional bonding capacity, according to Anderson.

The authority’s board gave the refinancing its initial approval Tuesday night. A final vote on the matter would be required before any bonds could come to market.

The transaction does not require approval of the City Council, Thompson, or city Controller Dan Miller, Anderson said.

City and state officials Wednesday evening were set to hold a public hearing on Harrisburg’s potential entrance into Pennsylvania’s distressed communities program, called Act 47. Ardo said potential funds from the Parking Authority bond deal would help the city get back on track.

“We hope that this move reassures lending institutions, thus making it possible for the city to borrow money to meet its immediate financial obligations,” he said in a phone interview. “And also it will help us develop a long-range plan that addresses both the structural operating deficit and our indebtedness issues.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.