HARRISBURG STRONG PLAN BENEFITS ENTIRE REGION
As aspects of the Harrisburg Strong plan and related agreements are finalized, the Dauphin County Commissioners stressed that the accord is good for the city and the entire region.
In addition to avoiding bankruptcy and ending the economic uncertainty over Harrisburg’s future, the plan provides a way to solve the city’s debt that is fair to all the stakeholders.
“From the beginning, this board of commissioners has said we wanted to work with Harrisburg to find a solution that would be just to the city as well as the rest of Dauphin County,’’ said commission Chairman Jeff Haste. “Not only does this plan accomplish that goal, but it also solves the long-term issue of how to handle the region’s waste.’’
Since the Harrisburg Strong plan was submitted to the Commonwealth Court on Aug. 26 by state-appointed receiver William Lynch, there has been a lot of reporting about various aspects of the agreement. What follows is a look at some key points related to the county.
Better financial footing for Dauphin County
Under the plan, Dauphin County would see its overall debt exposure to Harrisburg drop by more than $40 million and would have the opportunity to recoup $21 million already spent covering the city’s incinerator debt.
As part of the plan, the county would back a portion of the bonds issued by the Pennsylvania Economic Development Financing Authority to purchase the city’s parking system and then lease it back to Harrisburg over 40 years. The county would also be assisting in covering some of the debt payments for the Lancaster County Solid Waste Management Authority (LCSWMA) to purchase the Harrisburg incinerator.
Money from the parking system borrowing, as well as from the sale of the Harrisburg Authority’s resource recovery facility to LCSWMA, will be used to pay off the county’s incinerator guarantee. It will also allow the city to pay off its debts and have sufficient funds to maintain services, address aging infrastructure and help spur development.
Under the “Harrisburg Strong” plan, Dauphin County would be responsible for up to $99 million in guarantees and fees (including the $21 million already spent by the county) — far less than the current $140 million in incinerator debt the county is now obligated to cover for the city.
The county’s obligations under the Harrisburg Strong plan would include:
- $800,000 per year to help cover interest payments associated with the bonds used for LCSWMA to buy the Harrisburg incinerator. This is expected to total $16 million over 20 years.
- Up to $36 million to assist in disposing of ash from the Harrisburg incinerator. These payments, expected to be roughly $2.3 million annually, would not begin until the fifth year of the agreement.
- If LCSWMA is selected as the recipient of the county’s trash after 20 years, LCSWMA will pay the $24 million debt guaranteed by the county.
In terms of annual cost, the county in 2014 would start paying the $800,000 to help with LCSWMA’s incinerator debt under the plan. Then, in the fifth year, the county will begin paying $2.3 million to help with ash disposal, bringing the yearly payment to $3.1 million.
That $3.1 million is far less than the $7.5 million the county is now paying to cover the city’s incinerator debt.
“This plan does require all the stakeholders to step up,’’ Haste said. “At the same time, we were able to strike a good balance for all of Dauphin County’s residents.’’
Haste added the agreement does not call for either a commuter tax or a county sales tax, features some have called for but that the county commissioners have long opposed.
As part of the plan, bond insurer Assured Guaranty Municipal Corp. will insure a portion of the debt used in the purchasing of the city’s parking system. Under the plan, the commonwealth will be entering into a long-term parking lease with the system, which will help ensure the parking revenues are more than enough to cover operating costs and debt service.
Additionally, the county and AGM in later years will be able to split a portion of excess revenues generated by the parking system, which will eventually allow Dauphin County to recoup the $21 million already spent covering the city’s incinerator debt. Additional revenues generated by the parking authority would go to the city.
“This agreement takes the economic uncertainty caused by Harrisburg’s debt problem off the table and sets the stage for future growth,’’ said Haste. “The region has shown it can come together to solve tough problems and that’s what leadership is about.’’
Achieving a long-term waste management solution
The sale of the Harrisburg Authority’s resource recovery facility to LCSWMA provides a long-term municipal waste solution that allows the region to benefit from being able to send waste to the Harrisburg and Lancaster facilities. It also makes operational sense, since Covanta Energy will continue to operate both plants.
While the plan calls for a slight increase in tipping fees at the start of 2014, the impact on residential trash bills will be negligible and roughly the same that would have been seen under the existing contract with the Harrisburg Authority, which allowed for increases tied to the consumer price index (CPI).
Under the proposed agreement, the tipping fee per ton of trash brought to the incinerator will increase by $3 to $80 and stay at that rate until 2016. It then would rise by $5 in 2017 and another $5 in 2020, after which increases would be based on the CPI.
For the average county resident, the $3 tipping fee would be no more than a roughly 1.5 percent increase in their annual trash bill.
Harrisburg Strong plan lays groundwork for regional economic growth
“The receiver’s plan addresses the city’s issues in a comprehensive way, allowing it to pay off its crushing debt load and have money to eliminate the budget shortfalls that hobbled Harrisburg year after year,’’ said Haste. “At the same time, it lowers the county’s overall exposure to the city’s debt and provides a way for the county to be reimbursed over time for what it spend covering the incinerator bonds.’’
David Black, president and CEO of the Harrisburg Regional Chamber and CREDC, said he believes the plan is good for Harrisburg and the region.
“First of all, it stops the incinerator from being Harrisburg’s problem or the county’s problem and it becomes part of a regional solid waste authority, and Lancaster has tremendous experience,’’ he said. “I think they’ve had a vision for some time how to operate the two facilities together.’’
Just as important, Black said, the plan removes the financial uncertainty that’s been hanging over Harrisburg and sets the stage for regional economic growth. The business community likes certainty, and the plan gives would-be investors the message that the city’s situation is under control and no longer under the threat of a costly bankruptcy.
“I think with the solution of the debt crisis, Harrisburg is poised for an incredible renaissance based on what we have going on and getting out from under this debt,’’ he said. “I think that positively impacts the region as well.’’
Black also praised the county commissioners for their leadership through the process and said they fulfilled their role to serve the entire county. If Harrisburg had been allowed to fail, the impact would have been felt throughout the area.
“The region is fortunate to have the leadership of the county,” Black said. “[The county commissioners] struck a great balance in both serving the county as a whole and the city, and I think the entire business community understands and appreciates that role.’’
