Two bond sales conducted to implement the Harrisburg, Pa., financial recovery plan priced within the expected range when receivership officials filed the plan in August, according to a status report to be filed with the Commonwealth Court of Pennsylvania.
The report, which state-appointed receiver Bill Lynch's team expects to file early the week of Jan. 20, said final net proceeds available from the sale of the city incinerator from the Harrisburg Authority to the Lancaster County Solid Waste Management Authority was $129.9 million, in between expectations of $126 million and $132 million.
Proceeds paid from the long-term capital lease of parking assets from the city and the Harrisburg Parking Authority to the Pennsylvania Economic Development Financing Authority were $267 million, within the expected range of $258 million and $268 million.
Lynch's team includes financial advisor Steven Goldfield of Public Resources Advisory Group and lead attorney Mark Kaufman of McKenna Long & Aldridge LLP. They filed the so-called Harrisburg Strong plan on Aug. 26. The Commonwealth Court approved the plan on Sept. 19 and the recovery team closed last month.
They said the plan would keep Pennsylvania's city out of bankruptcy.
Pennsylvania officials on Wednesday asked the court to vacate Harrisburg's receivership and remand it to the state-sponsored workout program for distressed communities, known commonly as Act 47. Fred Reddig would coordinate the effort.
The transactions eliminated roughly $490 million of city debt and other obligations, according to the report. The deals involved more than 15 settlement agreements, including one with a dozen municipal entities and one with 13 subcontractors to Covanta Energy Corp., a creditor and the operator of the incinerator. In all, 53 firms were involved in the closings.
"Importantly, after consummation of the Strong Plan, the city is not a guarantor of the debt service payable by either [the Lancaster agency] or PEDFA," said the report. "The vast majority of the Strong Plan was not merely a restructuring of city liabilities, but was actually the complete elimination of debt and other obligations."
The exceptions are general obligation bonds, restructured under the plan to cover four defaulted GO payments from March 2012 to September 2013, and the so-called Verizon bonds, which are being restructured. Repayments come due in 2016 on $40 million in debt connected to the Verizon Communications building in Strawberry Square downtown. Verizon said it would not renew its lease, which expires that year.
According to the report, Harrisburg will begin to receive about $288,000 per year as a host fee from the Lancaster agency and tipping fees that haulers of municipal solid waste will drop slightly. The city will also realize an immediate increase in parking tax receipts with $1.55 million per year no longer pledged to Harrisburg Parking Authority bonds.
All parking bonds that the city guaranteed have been repaid in full or an irrevocable escrow has been established to provide for payment when the bonds can be redeemed according to their terms.
"In the event there is a downturn in parking revenues, increase in expenses or both, the city is no longer at risk that its general fund will be tapped to pay for any shortfall on parking bonds," the report said.
Harrisburg will be entitled to lease payments that begin at $2 million per year and escalate thereafter throughout the lease with PEDFA, a unit of the state Department of Community and Economic Development. Once the Harrisburg Parking Authority bonds were defeased, the city received the next $35.9 million in parking proceeds. The city used $6 million of parking bond proceeds on Dec. 23 to make its first GO payment since September 2011.
The city also used $4.5 million of parking bond proceeds to repay 40% of its obligations to suburban communities resulting the alleged overcharging of sewer rates.
Harrisburg, according to the report, ended the year with a fund balance of more than $4 million, subject to an audit later this year, and accounts payable of less than $2.7 million.