As the clock starts to tick for Harrisburg to act, local officials are parsing through a 418-page fiscal recovery plan that recommends the cash-strapped Pennsylvania city sell its incinerator and sell or lease other assets to pay down $220 million of outstanding debt tied to the facility.
The challenge: Getting everyone on the same page.
Novak Consulting Group, which compiled the plan, recommended against a bankruptcy filing, instead advising the state’s capital city to sell and lease the incinerator and parking facilities to deal with its incinerator debt.
Julia Novak, president of her Cincinnati-based namesake firm, presented the report to the City Council Monday night. She will return to Harrisburg next Tuesday for a special session with the council. Officials will also hold a public hearing on June 28.
Harrisburg entered Act 47, the state’s program for distressed municipalities, in December. Bonds outstanding on the incinerator total $220 million. Novak maintains that asset and lease sales would help pay down much of the incinerator debt, plus meet short-term liquidity needs. The sales would also help the city repay a combined $75.5 million to Dauphin County, bond insurer Assured Guaranty Municipal Corp. and the facility’s operator.
Novak, whose firm stands to collect $980,000 for its work as Harrisburg’s coordinator, said a major challenge is getting all parties to concur on what works. They include the City Council, Mayor Linda Thompson, Dauphin County and local agencies such as the Harrisburg Authority, which owns the incinerator, and the Harrisburg Parking Authority, which operates the garages.
“I think people will see into the report in direct relation to what they want to see, and what they’re asked to contribute,” Novak said Tuesday in a telephone interview. “If you’re a resident, you see the cutting of services and a modest tax increase. If you’re a bondholder, you see it as a matter of the city making good on its obligations. If you’re an employee, it’s about having to give up raises.
“You cannot force people, obviously, to collaborate. I sincerely hope there’s cooperation,” she added. “As I said at the meeting and in the report, no single individual is responsible for Harrisburg’s problems, but this is the only group of people who can get it out of the situation they’re in.”
Unity must come soon. After the June 28 hearing, the City Council has 25 calendar days, or until July 23, to act on the recommendations. Failure to implement a plan by then would prompt Pennsylvania to withhold grants, loans and payments to Harrisburg and its agencies, according to the state Department of Community and Economic Development.
“There is no silver bullet in the plan, but I’m hoping the City Council will work with the mayor and staff to reach an agreed plan of action in the best interests of the city and the region,” Thompson said in a statement.
Councilman Brad Koplinski pointed out that the city’s operating budget would lose annual parking revenue with no guarantee that Dauphin County would offset those lost funds with a proposed allocation of gaming fund revenue. In addition, he stressed that any sale or long-term lease of city assets must help Harrisburg’s long-term finances and not just fill deficits and pay down outstanding debt.
“While it does mandate the city to do things in the report, there’s nothing binding on [Assured Guaranty], the county or other entities to go along with the plan and to make sure that they do their part,” Koplinski said.
Harrisburg Authority board chairman Marc Kurowski said getting all the stakeholders together to outline what everyone can agree upon is vital in addressing Harrisburg’s fiscal challenges. “I don’t see how this discussion goes forward without all the parties being involved,” he said.
The Lancaster County Solid Waste Management Authority, a neighboring incinerator agency, has offered $124 million for the Harrisburg facility.