It was a creative mess made. Therefore, it will take creative means to clean it up.
The city of Harrisburg’s debt crisis is a national story, but one with still a bit of local confusion. Undoubtedly, the public understands there is a mess—a complicated, contemptible one at that. But, truth be told, there are still so many of us wondering: How did this happen?
There are several theories and quite a few facts.
The long and short of it is this—a public project went bad combined with normal urban municipal fiscal challenges, overlaid with antiquated systems of governance and tinged with political perversions.
However, to say the incinerator is a public project gone bad is an understatement. In 1972, the incinerator was built as the region’s answer to its waste. Ideally, the facility would convert trash to steam and electricity, which the city would sell. Ideally, the trash would be flowing in from places local and afar. Ideally, the whole thing would run cleanly, smoothly, efficiently and profitably. That was the public message.
In reality, that hasn’t happened as planned or promised. Never quite right since it was built, the peak of the incinerator’s troubles came in the 1990s, when massive disrepair plagued it, and Dauphin County decided it was cheaper to use a landfill for 10 years instead of the city’s facility. With that county decision, the incinerator lost immense value.
Environmental and operational problems exacerbated the situation. In 2003, the incinerator was $104 million in debt. At that point in time, the options were either to shut it down or fix it up. It was decided to do the latter.
In order to enable the modernization and retrofit, the county agreed, upon completion of the construction, it would bring all of its trash back to the incinerator. The county committed to guaranteeing some of the retrofit bonds. The city did, too.
Both received upfront guarantee fees for doing so.
The construction didn’t go as planned. Barlow Projects Inc. was unable to finish what it started. More funds needed to be taken out. In 2007, the Harrisburg Authority, which owned and operated the incinerator, borrowed more money. The city and county stepped in again to provide loan guarantees and again received guarantee fees for doing so.
As with the first guarantee agreement, this one was voted on by the Authority board, county commissioners and the City Council, brought together by then-Mayor Stephen Reed, with only one dissenting vote among 10 elected officials. Current Mayor Linda Thompson in 2007 sat on the council for this guarantee and voted in favor of the borrowing. By 2008, the incinerator carried $230 million in debt, was delayed in reopening and generated less revenue than anticipated.
While all that was occurring, the city faced year after year of structural deficits.
To combat this common municipal problem, the so-dubbed mayor-for-life Reed didn’t raise taxes or services fees to meet the increased cost of running government. Rather, he located people and arrangements to devise injections of money, closing the holes that continually popped up. That money came by way of various refinances, funds and firms.
Professionals and consultants were brought in to help and paid well for their assistance.
As a result, Harrisburg residents are on the hook for what has become an accumulation of principal, interest, penalties, legal fees, consulting fees, advisory fees and more. Harrisburg is the first and only full guarantor of the incinerator’s debt. As second guarantor, Dauphin County guaranteed $144 million of it, but the agreement states that, for any payment the county makes, the city will pay it back. Neither the Authority nor Harrisburg has been able to make any of the incinerator’s debt payments. For that reason, both the city and the Authority have suits filed against them by the county, bond insurer and trustees.
On top of that, the city has skipped multiple general obligation debt payments and vendor payments. City government has been cut to bare bones, and liabilities for a variety of inventive financial transactions loom on the horizon.
Taking what probably should have been a private business and attempting to make it something to generate revenue for the city, the incinerator is what makes Harrisburg’s financial crisis so distinctive and serious.
While several parties facilitated the debt of the incinerator over 15 years of debacles, it is the city that’s left holding the bag. The details of the incinerator saga tell a chronicle of political maneuvering, creative financing, cronyism, bad business and citizen apathy.
The city of Harrisburg has a population of just below 50,000 people and about 35 percent of those people live below the poverty line. It’s estimated that 50 percent of the city’s assessed property is tax exempt. Government buildings, hospitals, colleges and universities, churches and non-profits are concentrated here since it is both the capital of the state and the core of the region. This contributes to a daytime commuting population that doubles the total residential population.
Because of the incinerator fiasco, Harrisburg residents pay $200 a ton to dispose of their own waste at a facility within city limits, one of the highest trash rates in the country. Contrary to popular notion, the city’s taxes are not the highest in the area nor are utility fees besides trash rates extreme.
All of these dynamics have come into play as the state-appointed receiver and his team developed the plan to confront the task they’re charged with—clean up this mess. As much as can be done.
Tara Leo Auchey is creator and editor of today’s the day, Harrisburg.
