Harrisburg's municipal budget includes plans to issue $2 million of tax and revenue anticipation notes in mid-February, if needed. The notes would mark a return to the debt markets for Pennsylvania's distressed capital.
Finance director Bruce Weber told the city council Thursday night that the so-called Trans, which Metro Bank would offer, could cover a potential mid-winter cash-flow problem, which would ease when the city begins to collect real estate taxes in late February and early March.
The City Council may vote on the matter Feb. 11 as part of Mayor Eric Papenfuse's amended $52 million budget proposal.
Weber said city officials are basing the $2 million request, reduced from $4 million, after consulting with the Pennsylvania Economy League consultancy. According to Weber, the city's cash flow by mid-February could range from positive to negative $300,000.
"It would cover any potential cash-flow emergencies, to be used as a stop-gap measure similar to a homeowners' line of credit, if you will, due to the typical gap that is created between city expenses and revenues" said Weber, a former councilman whom the newly elected Papenfuse appointed.
Weber likened the Tran to an insurance policy to cover emergencies such as the 50-foot sinkhole that the city sustained on New Year's Eve 2012.
Harrisburg's emergence from state receivership is pending approval from the Commonwealth Court of Pennsylvania. The court in September approved the so-called Harrisburg Strong recovery plan, which hinged upon the sale of the incinerator to the Lancaster County Solid Waste Management Authority and a long-term lease of parking assets from the city and the Harrisburg Parking Authority to the Pennsylvania Economic Development Financing Authority, both of which closed in late December.
The deal also included some concessions from the main creditors of the incinerator debt, Dauphin County and Assured Guaranty Municipal Corp.
"This is another step in our bringing Harrisburg back, after fighting for a fair plan," said city councilman Brad Koplinski.
Debt-financing overruns to an incinerator retrofit project accounted for about $363 million of Harrisburg's roughly $600 million of debt and drove the city to financial ruin. The City Council filed for Chapter 9 bankruptcy late in 2011 but a federal judge dismissed it.
The incinerator debt was seven times the size of 49,000-population Harrisburg's general-fund budget.
Receivership financial advisor Steven Goldfield of Public Resources Advisory Group said Harrisburg has some "one-time" cash flow problems "that all hit during the time that is most difficult for it."
Goldfield, responding by email, cited labor union concessions and a grandfather clause pertaining to retiree benefits produced sick and vacation payments much larger than usual; January and February debt-service payments for an infrastructure bank and to lease financier Sun Trust Banks Inc., which the city has missed over more than a year; and the transfer of $1.3 million from the general fund for security of city payments to the Lancaster agency pending establishment of a lockbox account or a private hauler paying trash tipping fees.
Also, said Goldfield, 2013 was only a partial year of the increased earned-income tax that receiver William Lynch implemented.
"The foregoing coupled with the intention to pay the GO debt in March for the first time in several years is what it would not be a bad idea to have a Tran, just in case," Goldfield said.
Harrisburg last made a GO payment in September 2011, shortly after its third rejection of the initial state-sponsored Act 47 recovery plan. It made that one only after the Harrisburg Parking Authority agreed to a $7.4 million, 10-year lease extension to provide upfront money. Ambac Assurance Corp. has made the subsequent payments.
That one only came after the Harrisburg Parking Authority reworked a lease to provide the city upfront money.
Goldfield said the Tran "in no way" is intended to resolve the unfinished labor negotiations with the firefighters union. The International Association of Fire Fighters earlier in January rejected concessions that could have saved Harrisburg an estimated $1.8 million.
Under the recovery plan, the firefighters must approve pay-and-benefit concessions asked of all three unions for the city to end the year with a fund balance and not need a Tran next year.
That way, according to Goldfield, the city "will be able to use its fund balance to float the tax revenues during the first quarter."
