Incinerator Contract Threatens Harrisburg Bankruptcy? - WSJ Bankruptcy Beat.

Pennsylvania Capital Burned By Incinerator Debt

January 26, 2010, 3:44 PM ET

 The city of Harrisburg, Pennsylvania, is on the hook for tens of millions of dollars in debt-service payments tied to the Harrisburg Authority’s trash incinerator. Harrisburg guaranteed $288 million of the incinerator’s debt.

 SECRET TAXPAYER FUNDED INCINERATOR CONTRACTS

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Pennsylvania Capital Burned By Incinerator Debt

• January 26, 2010, 3:44 PM ET

By Marie Beaudette

Associated Press

Pennsylvania State Capitol building In Harrisburg

Bankruptcy fears are swirling around Pennsylvania’s capital city, which will face a $164 million budget gap over the next five years.

The city of Harrisburg, home to Pennsylvania’s state legislature, is on the hook for tens of millions of dollars in debt-service payments tied to the Harrisburg Authority’s trash incinerator. Harrisburg guaranteed $288 million of the incinerator’s debt.

According to a report issued by Management Partners Inc., a consulting firm hired to assess the city’s financial situation, Harrisburg’s total deficit will, over the next five years, balloon to $164 million, $144.8 million of which stems from the incinerator debt payments. Nearly $70 million of that total is due in 2010.

“The financial situation of the City of Harrisburg is just short of dire,” Gerald E. Newfarmer, president and chief executive of Management Partners, said in a statement posted on the city’s Web site.

On Monday, Harrisburg Mayor Linda Thompson spoke to reporters about the city’s financial crisis, but she didn’t go into great detail about plans to stave off a bankruptcy filing, the Patriot-News reported. According to the newspaper, Management Partners’ report lists 21 actions that the city could take to close up the deficit.

Thompson said bankruptcy “is not on my table as an option,” but the city’s controller, Dan Miller, says Harrisburg should consider it. Cities and towns can seek creditor protection under Chapter 9 of the Bankruptcy Code, which was designed to give distressed municipalities breathing room to develop and negotiate debt-repayment plans.

“I think we should seriously explore bankruptcy because I think it is our best option,” Miller said, according to the Patriot-News. “I think it could save city assets and we wouldn’t have to sell them. I am not saying we are going to go into bankruptcy, but we need to explore it.”

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