Lost bet on 'green' incinerator" causes bankruptcy of Harrisburg, capitol of Pennsylvania
10/12/11, "Harrisburg, Pa., Votes to File for Bankruptcy," National Journal
"Pennsylvania's capital city voted to file for Chapter 9 bankruptcy protection on Tuesday as it faced a state takeover, according to media reports.
The City Council voted 4-3 to seek bankruptcy protection for Harrisburg, which has a debt burden five times its general-fund budget "because of an overhaul and expansion of a trash-to-energy incinerator
- that doesn’t generate enough revenue," Bloomberg Businessweek reported.
The bankruptcy means the city will lose state aid, but that is better than the proposed recovery plans, Councilwoman Susan Brown-Wilson said, according to Bloomberg. But State Sen. Jeffrey Piccola, a Republican from Dauphin County, where Harrisburg is located, said the council's vote is against the law.
“I have been on the record as saying that bankruptcy is simply not an option. It’s illegal under Pennsylvania law, which prohibits third class cities from filing for bankruptcy,” Piccola said, according to PennLive.com.
Patty Kim, who voted against bankrupcy protection, said the city cannot afford the high cost of litigation that will likely ensue.
“The problem still exists that we still don’t have money, and we still haven’t moved one foot forward,” Kim said."....
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Public 'infrastructure' boondoggle
5/12/10, "An Incinerator Becomes Harrisburg’s Money Pit," NY Times
"Officials here decided seven years ago to borrow $125 million to rebuild and expand the city’s enormous trash incinerator, which the federal government had shut down because of toxic air pollution.
But the incinerator burned through the money faster than the trash, leaving Harrisburg residents feeling like they were living through a sequel to the 1986 movie “The Money Pit.”
There were contractor troubles, delays, cost overruns and squabbles. The city borrowed tens of millions more, shoveling good money after bad into the job.
It is now done, but at a staggering cost that threatens to bankrupt Pennsylvania’s capital.
The incinerator, which the city had hoped to turn into a moneymaker, is instead $288 million in debt. The lucrative contracts to burn trash that city officials were banking on never materialized. And there is a leak in the steam line that is supposed to allow the incinerator to sell the steam it generates.
The city has failed to make a couple of loan payments and does not know how it will come up with the $68 million in incinerator-related payments due this year — more than it spends in its annual budget....
The debt left Harrisburg with one of the lowest credit ratings of any municipality in the country. This month, Moody’s Investors Service warned that “the city’s guarantee of the incinerator debt results in a continuing burden that will stress the city’s finances for the foreseeable future, negatively affect its creditworthiness and jeopardize its future access to the public credit markets.”...
The cash crunch is evident in the halls and offices of government, where the air conditioning system has been out for weeks because officials stopped maintaining it properly to save money. Elevators feel like convection ovens. Last year, the city government’s voice mail system went down for months after maintenance was put off. ...The city’s decision to borrow another $125 million to rebuild and expand it was essentially a double-down bet. Harrisburg’s gamble was that by expanding the incinerator so it could burn up to 800 tons of trash a day, it would be able to burn more garbage from neighboring counties.
- The fees it would collect, the city hoped, would pay off the debt.
But some counties decided not to take their garbage to the incinerator. Dauphin County, of which Harrisburg is a part, does take its trash there, but pays lower fees than the incinerator originally anticipated — and about a third of what Harrisburg itself pays.
The final insult may well be that Harrisburg now pays some of the highest trash disposal fees in the country — all to prop up the incinerator that it built. The money goes to the public authority that owns the incinerator, but whose inability to pay off its debts has left Harrisburg on the hook.
The incinerator debt has been such a drain that the city has had to lay off 32 workers and increased taxes a few years ago, and it may well lead to more. The City Council rebuffed Ms. Thompson’s efforts to raise taxes and water rates this year. But an outside consultant whom the state helped pay for suggested that Harrisburg should be considering everything from raising taxes to freezing wages to selling the incinerator. ...
“Sometimes public works projects fail,” said William J. Cluck, an environmental lawyer who was recently appointed to the board of the Harrisburg Authority, the entity that owns the incinerator.
Pennsylvania has made it clear that it is unlikely to bail out its capital, and there are few answers on the horizon.
Even if the city decides to sell or lease its garages — an offer for more than $200 million from a private developer is on the table —
- it will not be enough to balance the books.
Only about half that money could be used to pay off the incinerator debt. The city owes more than $100 million in debt on its garages.""
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