Harrisburg, Pennsylvania, Council Told to Consider Bankruptcy
By Dunstan McNichol
April 27 (Bloomberg) -- Harrisburg, Pennsylvania, which has missed $6 million in debt payments since Jan. 1, should consider seeking Chapter 9 bankruptcy protection, City Controller Dan Miller told a three-hour special committee hearing.
Miller, the first of four people to testify last night in an “informational session” on insolvency convened by Gloria Martin-Roberts, council president, said bankruptcy may offer Harrisburg relief from $68 million in debt-service payments this year tied to a waste-to-energy incinerator project. Martin- Roberts opposes a bankruptcy filing.
Harrisburg, the capital of Pennsylvania, the sixth-most populous U.S. state, has guaranteed payments on $282 million in bonds on the incinerator, run by the Harrisburg Authority. The payments on the bonds and on a working-capital loan this year add up to four times the amount the city collects in property taxes each year, budget documents show.
“It’s not good,” Miller said at the start of the hearing before a silent audience of about 20 that included city officials and union members. “Nobody wants to do it, but it’s there for a reason,” he said. “Maybe for the purpose of helping cities that are in the situation we are in now.”
The city this month skipped a $637,500 payment due on a loan to Fairfield, New Jersey-based Covanta Holding Corp., operator of the incinerator.
Missed Payment
On April 23, the Harrisburg Authority told the city that it won’t make a $425,282 payment due May 1 on a $17 million bond issue the city has guaranteed, said Robert Kroboth, interim finance manager. Kroboth said it isn’t likely that the city will honor its guarantee, meaning the payment will fall to the bond’s insurer, Hamilton, Bermuda-based Assured Guaranty Municipal Corp.
“When the trustee informs us we need to make the payment, we do,” Betsy Castenir, a spokeswoman for Assured, said yesterday. She said the firm hasn’t gotten a notice from the trustee regarding the May 1 payment.
The city has been negotiating with other groups involved in the incinerator project, seeking a 90-day relief period from debt payments. The other groups include Dauphin County, which has guaranteed a portion of the debt, Assured Guaranty, and the Harrisburg Authority. A formal “forbearance agreement” may be presented to the council within two weeks, Martin-Roberts, the council president, said after the hearing.
Comments:
As we have stated in the past:
Individual bankruptcies will rise,
Corporate bankruptcies will increase,
Cities will go bankrupt,
States will declare bankruptcy,
and finally entire Countries will go broke.
We are in a Kondratieff Winter cycle with a fiat currency system, and "financial gravity" is about to teach us some difficult lessons.
By Dunstan McNichol
April 27 (Bloomberg) -- Harrisburg, Pennsylvania, which has missed $6 million in debt payments since Jan. 1, should consider seeking Chapter 9 bankruptcy protection, City Controller Dan Miller told a three-hour special committee hearing.
Miller, the first of four people to testify last night in an “informational session” on insolvency convened by Gloria Martin-Roberts, council president, said bankruptcy may offer Harrisburg relief from $68 million in debt-service payments this year tied to a waste-to-energy incinerator project. Martin- Roberts opposes a bankruptcy filing.
Harrisburg, the capital of Pennsylvania, the sixth-most populous U.S. state, has guaranteed payments on $282 million in bonds on the incinerator, run by the Harrisburg Authority. The payments on the bonds and on a working-capital loan this year add up to four times the amount the city collects in property taxes each year, budget documents show.
“It’s not good,” Miller said at the start of the hearing before a silent audience of about 20 that included city officials and union members. “Nobody wants to do it, but it’s there for a reason,” he said. “Maybe for the purpose of helping cities that are in the situation we are in now.”
The city this month skipped a $637,500 payment due on a loan to Fairfield, New Jersey-based Covanta Holding Corp., operator of the incinerator.
Missed Payment
On April 23, the Harrisburg Authority told the city that it won’t make a $425,282 payment due May 1 on a $17 million bond issue the city has guaranteed, said Robert Kroboth, interim finance manager. Kroboth said it isn’t likely that the city will honor its guarantee, meaning the payment will fall to the bond’s insurer, Hamilton, Bermuda-based Assured Guaranty Municipal Corp.
“When the trustee informs us we need to make the payment, we do,” Betsy Castenir, a spokeswoman for Assured, said yesterday. She said the firm hasn’t gotten a notice from the trustee regarding the May 1 payment.
The city has been negotiating with other groups involved in the incinerator project, seeking a 90-day relief period from debt payments. The other groups include Dauphin County, which has guaranteed a portion of the debt, Assured Guaranty, and the Harrisburg Authority. A formal “forbearance agreement” may be presented to the council within two weeks, Martin-Roberts, the council president, said after the hearing.
Comments:
As we have stated in the past:
Individual bankruptcies will rise,
Corporate bankruptcies will increase,
Cities will go bankrupt,
States will declare bankruptcy,
and finally entire Countries will go broke.
We are in a Kondratieff Winter cycle with a fiat currency system, and "financial gravity" is about to teach us some difficult lessons.
PW, when is the U.S. finally going to go broke or reach currency crisis in your opinion?
ReplyDeletePW, I thought that states were not allowed to go bankrupt. How can states declare bankruptcy?
ReplyDeleteAnonymous as 6:24pm you are a very sharp reader. As you state quite correctly, states and countries technically cannot go bankrupt. They can default on their debt, and in the case of a state, the federal government can appoint a receiver, but, as you point out, state actually have "sovereign immunity" which precludes them from a bankruptcy court. I was using the colloquial understanding of bankruptcy, so pardon me for a little literary licence.
ReplyDeleteThe results of state or country default are similar to technical bankruptcy. Either no one will lend the borrower money, or they will at only very high rates (ie: 20% for 2 year Greek bonds recently).
Anonymous at 6:17pm you have asked a very difficult question. The US will reach a currency crisis after other major currencies have gone through crisis of their own (think British Pound in particular and Euro). My expectation is that their will be a "flight to safety" to the US dollar (the world reserve currency) once the coming crisis manifests. At some point, likely several years from now, I anticipate a flight from the US dollar to the final reserve currency, the one that is not fiat currency - that is gold.
ReplyDelete