Uncertainty about the financial fate of Harrisburg, Pa., still hovers over the city’s parking authority, Moody’s Investors Service said late Tuesday.
Moody’s affirmed its Ba3 rating and negative outlook on the Harrisburg Parking Authority’s fifth-lien parking revenue bonds, Series 2007 T. The move affects $17.3 million of outstanding long-term debt.
“The Ba3 rating reflects the HPA’s exposure to the city of Harrisburg’s ongoing fiscal distress, uncertainties concerning the timing and execution of the city’s recovery plan under a state-appointed receiver that could ultimately result in a Chapter 9 bankruptcy filing for the city,” Moody’s said in a report.
Harrisburg is saddled with more than $310 million of bond debt that it cannot pay, related to cost overruns to an incinerator retrofit project. Its state-appointed receiver, William Lynch, said the city could run out of money in October.
Lynch’s proposal to force the City Council to triple its earned-income tax, to 1.5% from 0.5%, will go before the Commonwealth Court of Pennsylvania on Aug. 23.
Moody’s said its negative outlook reflects the “ considerable downside risk” to HPA’s credit quality from myriad uncertainties surrounding the city’s eventual exit from fiscal distress, including the possibility of using HPA’s assets in bankruptcy court to pay off a portion of the city’s debts as part of a future bankruptcy process.
“Trust indenture amendments executed in July 2011 appear to prevent the sale or lease of HPA assets without ensuring full bondholder security,” Moody’s said.
State law prevents Harrisburg from filing for Chapter 9 bankruptcy protection until Nov. 30. After that, Lynch could ask the state to file on Harrisburg’s behalf. Last year the City Council filed under Chapter 9, but a federal judge invalidated the filing.
Last September, with $3.3 million of general obligation bond payments looming and Harrisburg short on cash, the city worked out a $7.4 million, 10-year lease extension with the authority for three downtown garages, in which the authority sold taxable debt at a 10.75% coupon to make the up-front lease payment to the city.
According to Moody’s, the Series T bonds are secured by a fifth lien on the net revenues of the authority’s coordinated parking system, according to the authority’s 2007 trust indenture, and are subordinate to several other bonds.
Pennsylvania’s Senate has scheduled a hearing for Aug. 29 on the bond financings.