- “Pennsylvania’s cash-strapped capital city, Harrisburg, filed for Chapter 9 bankruptcy protection late Tuesday, listing debts of $500 million and assets of $100 million, Bloomberg News reported Wednesday on its website, citing an attorney for the city counsel.”
The story is a perfect illustration of what happens when politicians get their hands on other people’s money and try to act like businessmen.
Harrisburg’s problems center around its 1972-vintage trash incinerator, used to generate steam and electricity for sale. Harrisburg is a city of just under 50,000 souls.
“The city faces $68 million in debt-service payments this year on loans it guaranteed to help the Harrisburg Authority retrofit a trash-to-energy incinerator built in the 1960s. That’s about four times what the city of 47,000 raises annually in property taxes, according to its budget. ” [emphasis added]
And from the same article, in 2010 the PA governor sends the city $3 million (taxpayer, good-money-after-bad) dollars to stave off an immediate crisis, then advises the city to indulge in asset-stripping the taxpayers of Harrisburg:
“Governor Ed Rendell, who ordered the funds released early, warned city officials against seeking bankruptcy protection and said they must work out a longterm solution, perhaps by selling city assets , before another round of bond payments due in March.” [emphasis added]
How in Heaven’s name, you might ask, did a city of 47,000 get itself into a situation where it had a $68 Million payment due? Why, through blue-sky politics, of course. Can there be any other answer? But, believe it or not, the $68 million is only part of the problem:
“Harrisburg’s 1972-vintage incinerator required repeated repairs — and refinancings — that put the project $94 million in debt before the federal government ordered the incinerator shut in 2003 because it was spewing toxic dioxin. Faced with eating that debt or refurbishing the plant, former mayor Reed led a push to invest $125 million in incinerator expansion and upgrades. The idea was to create a facility that would draw trash — and revenue — from nearby counties and produce steam and electricity that could be sold to local utilities.”
“But construction delays and design problems surfaced, causing the city to borrow even more millions. The city eventually brought in a new operator, who required more money to get the incinerator going. When the plant was finally operational, it never attracted the envisioned business. Now its steam line is broken, as is one of the turbine blades, eliminating steam sales and reducing its electricity production. The result is that the city has missed several debt payments…”
Delays and problems on a government financial project? I’m shocked, shocked. The city has reportedly poured some $288 Million into the failed project. Ain’t it great to have the taxing authority? People will lend you money for anything at all, no matter how stupid!
The net result? The people of Harrisburg will have a quarter-Billion-dollar white elephant to remind them of the time when they trusted politicians, coupled with a future few decades of genuinely horrible city services (schools, police, courts, etc) to rub salt in the wound. Enjoy!