Harrisburg, Pa., receiver William Lynch on Wednesday chose the Lancaster County Solid Waste Management Authority to enter into exclusive negotiations to purchase the incinerator that has become the face of the city’s debt crisis.
Cost overruns to retrofit the incinerator have saddled Harrisburg with about $310 million of bond debt that it cannot pay.
Lynch said in a filing this week with the Commonwealth Court of Pennsylvania that the city could run out of money in October. Harrisburg ended May with a $5.6 million cash balance, he said, but early receipt of tax revenues and the city’s missing two general obligation bond payments in March totaling $5.3 million inflate that number. A second major payment on GO bonds is due in mid-September.
Lancaster, which abuts Harrisburg’s Dauphin County to the south, has long been interested in acquiring the facility. Last year it offered $124 million, without assumption of debt, for the trash burner four miles outside downtown in Pennsylvania’s capital city. Cambridge Project Development Inc. of Miami had also submitted a bid.
This time, the final price will hinge on negotiations with Lynch and his team, which includes Atlanta law firm McKenna Long & Aldridge LLP.
“We were confident that our solution was the best choice all along and are glad the receiver has selected [us],” Lancaster CEO James Warner said in a statement.
Lynch’s predecessor, David Unkovic, established a June 30 deadline for a sale or lease of the incinerator, parking garages and sewer and wastewater system as part of a financial recovery plan he filed Feb. 6. He abruptly quit on March 30, citing “political and economic crosswinds.”
The announcement came one day after the Harrisburg City Council filed a lawsuit in its latest bid to nullify the receivership, which lawmakers and Gov. Tom Corbett established last fall after the council three times rejected a proposed workout plan under the state’s Act 47 workout program for distressed communities.
In a filing in U.S. federal court on Tuesday, the council, city Controller Dan Miller and Treasurer John Campbell argue that the receivership law, which the Pennsylvania General Assembly passed last year, violated the equal protection clause of the 14th Amendment to the U.S. Constitution. They also maintain that the legislature violated the Pennsylvania constitution by improperly delegating its constitutional responsibility to the governor.
The lawsuit seeks immediate relief from the recovery plan Unkovic drafted and Lynch now oversees. It called for the sale or lease of city assets, an increase in the earned income tax to 1.5% from 0.5% and renegotiating municipal union contracts.
The City Council attempted to invalidate the receivership when it filed a Chapter 9 bankruptcy petition, but a federal judge invalidated the filing in November.
Kennett Square, Pa., attorney Paul Rossi filed the latest lawsuit. Rossi represented three Harrisburg citizens, including former mayoral candidate Nevin Mindlin, in a similar lawsuit, but U.S. District Judge John Jones 3d said the three lacked legal standing. “Instead of challenging that ruling to the Third Circuit and wasting a lot of time, the majority of City Council members stepped forward and offered their time and efforts,” Rossi said at a City Hall press conference.
City Council President Wanda Williams, speaking before the Municipal Financial Advisory Committee on Wednesday, called the receivership “fundamentally un-American and clearly undemocratic.”