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WATCHBLOG: Whose debt is it, anyway?

By   /   December 19, 2012  /   No Comments

By Eric Boehm | PA Independent

HARRISBURG – Like an alcoholic who finally admits he has a problem, the city of Harrisburg officially acknowledged more than $300 million in debt attached to its incinerator on Tuesday night as the City Council adopted its 2013 budget.

CASH TO BURN: The Harrisburg incinerator has more than $300 million in debt.

As they say, it’s the first step.

The incinerator debt is technically held by the Harrisburg Authority, which handles the city’s utility systems and is funded through the issuance of debt and collection of user fees.

That debt was always officially backed by the city, but officials preferred turning a blind eye to the biggest splotch of red ink on their books.  Now, it will be added to a 2013 budget that is already $15 million in the red before the year begins.

Tara Leo Auchey, otherwise known as todaysthedayHarrisburg, has all the details on last night’s meeting, including the acknowledgement of the debt:

(F)or the first time Harrisburg City Council with its new voting bloc included the Harrisburg Authority’s incinerator debt in the City’s budget. It’s a guarantee obligation that has always been rejected by the majority of City Council, not included in the City’s budget as City debt, and has resulted in lawsuits from Dauphin County and the bond insurer Assured Guaranty. Before Councilors voted on Brad Koplinski’s amendment to not include 2013s $72.1 million, Finance Director Kroboth asserted, “I understand philosophically no one wants to have that debt,” but he told them, the City was legally obligated to add it in. “It is what it is,” he said. Thus, for the first time, the City has acknowledged this tremendous debt by putting it into the budget.

The budget and the City’s recovery is assumed contingent on the sale/lease of the Incinerator and the City’s parking system as well as union concessions. If those things fall into place, then just maybe, maybe, creditors will concede, too, and municipal bankruptcy will be avoided.

The funny thing about debt – as Kroboth pointed out – is that once you have it, it doesn’t really matter whether you want to have it or not.  Philosophically, I don’t want to pay my student loans either, but that argument doesn’t hold too much weight with the banks expecting me to do it.

Steve Frates, an expert on municipal finances and director of research at the Davenport Institute at Pepperdine University, applauded Harrisburg for finally acknowledging the lead weight of the incinerator’s debt.

“It’s good that they do that, but it is well past the time that they should have done it,” he said Wednesday.

So that’s the first step.  Pennsylvania’s broke capital city only has 11 more to go.

For more on the mess in Harrisburg, the incinerator and what the state might be doing to fix it, check out coverage from Melissa Daniels here and here.

Contact Boehm at [email protected] and follow @PAIndependent on Twitter