Harrisburg City Council at a legislative session on Tuesday.
Harrisburg is weighing a plan to pay off its remaining debt, which would make the city debt free for the first time in decades.
On Tuesday, Harrisburg City Council discussed a proposal by the city administration to retire the remaining $20 million in general obligation bond debt, all at once, to bond insurer Ambac Assurance Corp.
The $20 million forbearance liability is money that the city owes after defaulting on loans, originally issued in 1997, during its financial crisis a decade ago.
In September, Harrisburg made its final payment on additional general obligation bonds, also incurred under the administration of former Mayor Steve Reed. The remaining forbearance liability represents the outstanding debt on Harrisburg’s books.
At the end of October, Harrisburg had a nearly $35 million fund balance, according to Brian McCutcheon, accounting manager for the city. If the debt were paid off, he projected that the city would end 2022 with around $14 million in the bank—an amount that, he said, would represent a sufficient cash reserve.
However, council members expressed concern with spending such a large chunk of money at once, without knowing for certain what the find balance will be at the end of the year.
“I think all of us in this room support taking care of this debt as quickly as possible,” said council member Westburn Majors. “But taking a little more of a conservative approach would make sense to me.”
McCutcheon and other city officials stressed that the longer the debt goes unpaid, the more the city accrues in interest. By 2029, when the debt would be paid off if the city continued its regular payment schedule, Harrisburg would owe another $4 million in interest, he explained. Currently, the city’s interest rate is set at 5% after a refinancing deal made with Ambac in 2021. That rate will jump back up to 6.75% in November 2024.
“We might as well pay it off now,” said City Treasurer Dan Miller. “We have the funds to pay our bills, to pay our payroll and to make it through the year. It’s much better for the taxpayers.”
Council also discussed alternative options, such as paying off a smaller portion of the debt over a longer time period.
In the end, council decided to table the issue and bring it back on the agenda for a vote in the coming weeks.
In other news, council approved the reauthorization of the Harrisburg Downtown Improvement District, a nonprofit that promotes businesses, cleans and provides services in downtown Harrisburg. The organization was originally founded in 1999. On Tuesday, it was reauthorized for another five years, through 2027.
Additionally, council voted in favor of continuing an intergovernmental cooperation agreement with Swatara Township to use its composting facility for another two years at a rate of $50,000 annually.
Council also recognized longtime Harrisburg High School-John Harris Campus basketball coach Kirk Smallwood, naming Nov. 15 “Kirk Smallwood Day” in his honor. The coach retired in May as the winningest coach in the history of the district.
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