Friday, July 25, 2014
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UPDATES: Harrisburg plan would trim debt

Creditors share the pain

UPDATES: Harrisburg plan would trim debt

UPDATE: The Bond Buyer calls state-appointed Harrisburg city financial receiver William Lynch's plan to refinance the city's crushing $360 million debt load "as complicated as the intricate deals that impoverished Pennsylvania's capital city."

Highlights (summarized in the Patriot-News here):
- Lynch would sell the incinerator to Lancaster County's trash authority, raising about $130 million, and lease city parking to a private operator, raising about $260 million.
-The city will gets a few million dollars in yearly parking revenues - parking fees will go up - plus $16 million for economic development and city worker pension payments.
- Suburban towns that sued the city for overcharging for sewer services (one of the schemes by which ex-Mayor Stephen Reed and his henchmen propped up their budgets) will get back $11.2 million over six years, less than half of what they demanded.
- Lender CIT will get $21.5 million of its $37 million incinerator-finance claim paid
- Incinerator operator Covanta will get $9.5 million of its $26 million claim
- Contractor JEM Group will get about 40 percent of its $1.8 million claim.
- Dauphin County and its bond insurer will get a minimum $210 million of their nearly $300 million claim, plus partial parking revenues that could pay off the rest of their credit over 25 years.

EARLIER: Cash-strapped Harrisburg's state receiver's office has published a plan to sell the money-losing city incinerator, lease the parking garages to private operators for 40 years, trim the city budget, and pay part of the $300 million-plus that bondholders are owed from a long borrowing binge that enriched bankers, lawyers and politicians at public expense. 

See the "Harrisburg Strong Plan, August 26, 2013" here.  It's hundreds of pages, with no financial summary. "You can go into the plan where it talks about what the different parties get," says spokesman Cory Angell. "Our focus is more on what is in it for the City of Harrisburg."

City Councilman Brad Koplinski, who opposed the state's takeover two years ago, said the deal has general support from the state, city, bondholders and other creditors. He called it "a global solution with shared pain," adding that Lynch "has come up with some innovative solutions in financing our debt, including using vehicles like tax-exempt bonds.”

Lawyer Mark Schwartz, who represented City Council in its failed attempt to resist receivership, says he plans to challenge the bonds’ tax-exempt status, which he called “a rip-off of the taxpayers.”

“We are selling the incinerator and leasing our garages without losing our stream of revenue,” Koplinski added. “The creditors have come to the table, the Commonwealth has been helpful and the taxpayers are not bearing the full extent of the burden, as some thought should happen." He added that he’s “happy” the U.S. Attorney’s Office and Pennsylvania officials are still “looking at this matter” of who “got us into this mess."

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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