Deep In Debt, Pa.'s Capital Faces State Takeover
DAVID GREENE, Host:
Pennsylvania's capital city is in one financial mess. The city borrowed millions of dollars, starting about eight years ago, to rebuild a huge incinerator dating from the 1970s. Officials in Harrisburg were sure they'd make the money back and bring in revenue by securing lucrative contracts. Instead, the city is more than $300 million in debt. And this week, state lawmakers could vote to effectively seize control of Harrisburg's finances. Craig Layne of member station WITF reports on how things went wrong.
CRAIG LAYNE: Harrisburg's is a story about money and trash - the trash that's dumped daily into the Harrisburg incinerator, where it's burned to make electricity. The problem is, that trash isn't making enough money to pay off the incinerator's debts.
NEIL GROVER: When they borrowed half this money, everybody knew at that table that debt couldn't be paid - the public officials, the lawyers, the finance guys - because it's basic, plain math. Incinerators can only burn 800 tons of trash a day. And when you times that by the number of dollars for a ton, and it never equals anywhere close to what the debt payment is.
LAYNE: That's Neil Grover. He leads a citizen activist group called Debt Watch Harrisburg that wants to know who's to blame for the massive debt. He says a contractor who was supposed to refit the incinerator in 2003 bungled the job, forcing the city to borrow more money through municipal bonds to finish the work.
GROVER: When we started out, it was like a $12 million problem, and it got up to like a $282 million debt just to finish building the incinerator.
LAYNE: The incinerator finally became fully operational in 2010, but Grover says it still can't generate the $18 million it owes bondholders each year. Those bondholders have been getting paid, but bond insurers who've been footing the bill are suing the city for the money. Outside auditors are now pouring over the books.
Meanwhile, city council and Harrisburg Mayor Linda Thompson are battling over how to get out from under the growing mound of debt. Thompson's second plan for financial recovery was just rejected by the seven-member city council.
LINDA THOMPSON: Council, the legislative branch, has been the biggest obstructionists in this entire thing, because they don't want to sit down at the table and negotiate with all of the responsible and level-headed professionals, both with the private sector and the public.
LAYNE: Councilman Brad Koplinski says both plans would've been just too painful for taxpayers to bear.
BRAD KOPLINSKI: Folks have said we're either brilliant or crazy, and not sure which. But that allows for negotiations and conversations to be had when they normally weren't occurring, in some ways. So this can still be an opportunity here.
LAYNE: But one person's opportunity is another person's gridlock, and that could be broken just a few blocks away, on Pennsylvania's Capitol Hill. A state Senate proposal to grant the Commonwealth authority to take over the city's finances now awaits a House vote.
The bill would put a three-member board in control of the city's money and force the city to sell assets, like its money-making parking garages. Senator Jeffrey Piccola, whose district includes Harrisburg, drafted the bill and says its passage would be unprecedented in Pennsylvania.
JEFFREY PICCOLA: My sense is they're looking for a bailout. They're looking for somebody else to pay for their irresponsibility over the years. That's just not going to happen.
LAYNE: Harrisburg taxpayers are increasingly unhappy with the possibility of a state takeover, arguing it would disenfranchise them.
(SOUNDBITE OF RALLY)
UNIDENTIFIED GROUP: (Chanting) Kill the bill. Kill the bill.
LAYNE: At a recent rally, longtime resident Gail Lewis was gathering signatures against the legislation.
GAIL LEWIS: I think we've been taken advantage of. We need to find out who is behind it and how it happened. And then this whole Senate bill goes against our Constitutional rights.
LAYNE: Most Harrisburg residents and leaders oppose a state takeover. But with the stalemate continuing, it appears increasingly likely that the commonwealth will seize power over its capital.
For NPR News, I'm Craig Layne in Harrisburg, Pennsylvania.
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