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 August 26, 2013 - DAUPHIN COUNTY COMMISSIONERS NEGOTIATE AGREEMENT THAT KEEPS HARRISBURG FROM FINANCIAL COLLAPSE

HARRISBURG, PA (August 26, 2013) – After months of tough negotiations, the Dauphin County Commissioners have reached a proposed agreement with Harrisburg and the state-appointed receiver that takes the capital city from the brink of bankruptcy and returns it to sound financial footing.

From the beginning, the commissioners have stressed they would work toward a fair solution that would not penalize the other municipalities in the county or put an additional burden on residents, and Commission Chairman Jeff Haste said the board has accomplished that goal.

“This is a good agreement for everyone involved and, for the most part, everybody is close to being made whole,’’ Haste said. “We should also keep in mind that we’re doing this without the city going into bankruptcy, which would have been very costly to the entire region.’’

The agreement was submitted by the receiver’s office to the Commonwealth Court today and a hearing is expected in the near future. Harrisburg City Council is expected to review the agreement at its meeting Tuesday night.

Haste praised Gov. Tom Corbett for his decisive action in approving the state’s takeover of the city when the initial recovery process stalled. William Lynch, the state-appointed receiver, also deserves credit for his hard work in bringing all parties to the table, Haste said.

Under the proposed agreement, the county will no longer have to continue making bond payments for the Harrisburg incinerator and will eventually be able to recover portions of the payments made to date.

For the city, the agreement paves the way for long-term financial stability.

The proposed agreement will require final approvals from all parties involved, including the county; Harrisburg; the Harrisburg Authority, which owns the incinerator; Assured Guaranty Municipal Corp. (AGM), which insures the incinerator debt; the Lancaster County Solid Waste Management Authority (LCSWMA), which will be buying the Harrisburg incinerator; and the Commonwealth Court.

From the start, the commissioners were determined that allowing Harrisburg to fail was not an option.

“This is our capital city. How do we look to the other 49 states if our capital city goes bankrupt?’’ Haste said. “For central Pennsylvania, Harrisburg is the economic driver and as the city goes so goes our region. Leadership is about solving tough problems, and that is what this board of commissioners has done.’’

 

Ending Harrisburg’s incinerator problem

With the purchase of Harrisburg’s incinerator by the LCSWMA, the proposed agreement ends a problem that has financially strangled the city for more than 20 years. The sale also pays off the existing debt on the city’s burner, meaning the county will no longer be responsible for bond payments.

Combining the city’s resource recovery facility with Lancaster’s operation also provides a long-term solution to the region’s trash disposal needs. It makes operational sense as well, since Covanta Energy will continue to run both plants.

“This deal opens the doors to Lancaster’s even more modern resource recovery facility that is just outside our county’s border,’’ Haste said. “This is now a regional approach. Their facility is now part of a bigger plan and if the Harrisburg facility ever goes down, we have backup.’’

Under the proposed agreement, the tipping fee per ton of trash brought to the incinerator will remain approximately at the same level as anticipated under the original agreement with the Harrisburg Authority. The proposed agreement removes the possibility of residents facing a large increase in their trash bills, which would have happened in 2008 if the commissioners did not successfully block the Harrisburg Authority from raising tipping fees by $100. 

The county would retain control of its recycling program under the agreement, ensuring the continuity of a service popular with residents and which recently won a “Waste Watcher’’ award from the Solid Waste association North America’s Keystone Chapter. The county offers ten recycling drop-off sites and a free electronics recycling program for county residents.

 

The county’s guarantee

As part of the proposed agreement, the county will no longer be responsible for backing $140 million of the city incinerator’s bond debt, but will instead be helping with the financing of the parking system.

Under the plan, the county and AGM will guarantee a portion of the bonds issued with respect to the lease of the parking system by Pennsylvania Economic Development Financing Authority. This credit enhancement will substantially increase proceeds available for payments to creditors and funds for the city.

The parking transaction is also enhanced by a 30-year lease with the commonwealth, which will account for roughly 50 percent of the expected parking revenue. 

“The agreement makes sense for all the parties involved,’’ Haste said. “It gives the county a way to recoup a portion of the amounts spent on the city’s incinerator and lowers our overall debt exposure, it ensures the state will have adequate parking for the future and it gives Harrisburg the money it needs to pay off its obligations and return to financial soundness.’’

Before deciding to move forward, the county commissioners last month hired Walker Parking Consultants -- which has completed more than 12,000 parking projects worldwide – to review the proposal. The Michigan-based firm assured the county that parking revenues would cover operating expenses as well as the debt service. 

Additionally, the parking system will be run by two top-tier firms, Chicago-based Standard Parking, which would serve as the operator and AEW Capital Management of Boston, which would serve as property manager. Standard Parking manages roughly 2,200 facilities containing more than 1.2 million parking spaces and AEW is responsible for approximately $25.5 billion of real estate assets.


Goals finally achieved

While getting to this point has been a long and at times painful process, the agreement succeeds in meeting the original goals behind the entire Harrisburg incinerator project: Keep the city from plunging into bankruptcy and provide the best solution for disposal of the county’s trash. 

In 2003, when the county became involved in helping back the incinerator retrofit, the facility was facing closure because it could no longer meet federal clean air standards. With around $100 million in outstanding debt, shuttering the facility would have had a devastating impact on city services, taxes and may well have pushed Harrisburg into bankruptcy.

At the same time, residents in upper Dauphin County asked the commissioners for help in closing the Dauphin Meadows Landfill that had long been the source of pollution and safety concerns. The owners were seeking state approval to expand, a move that raised additional concerns about increased truck traffic on the narrow roads around the facility.

By directing all the county’s trash to Harrisburg’s incinerator, the commissioners were able to show the state that the landfill expansion was not needed and the facility closed.

“It’s been a hard battle, but we are now on a secure footing for the future,’’ Haste said. “Our region has a long-term solution to its trash needs that takes advantage of modern, waste-to-energy technology and the financial health of our state’s capital has been restored.’’

Contact: arichards@dauphinc.org
Category: Dauphin County
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