RENEE MONTAGNE, host:
Like so many American homeowners, the city of Harrisburg, Pennsylvania is underwater, deeply in debt with no easy or clear way out. NPR's Tamara Keith has this report on how that happened.
TAMARA KEITH: Most of Harrisburg's financial troubles can be traced here: the city incinerator, officially called the Harrisburg Resource Recovery Facility. It converts trash into power, but over the years, what it's done best is burn cash. Jim Klecko is a regional vice president for�Covanta Energy, the company under contract to operate the facility.
Mr. JIM KLECKO (Regional Vice President, Covanta Energy): There's nothing in the industry that even reflects the type of financial structure that this facility is in.
KEITH: While many of the nation's incinerators are nearly paid off, the one in Harrisburg is nearly $300 million in the hole. It's the result of years of bad decisions and bad luck. Klecko says the facility is working better now than it ever has, even operating at a profit - that is, if you don't count the debt.
Mr. KLECKO: If you ran at peak efficiency, 100 percent all of the time, just by pure volume, you couldn't process that much waste in a facility of this size to make their debt service.
KEITH: The total debt service owed this year by Harrisburg Authority, which owns all of the city's utilities, is $68 million. But the Authority has been missing incinerator payments left and right. So the responsibility falls to the city of Harrisburg, which backed the bonds. Problem is, the city can't handle the bills, either. It's already missed a couple of payments this year.
Mr. DAN MILLER (City Controller): Bankruptcy sounds bad. I think it - but it -but when you are insolvent, when you have very little few options, this may be, actually, the best option.
KEITH: Dan Miller is the city controller, and he says that $68 million bill for the incinerator is more than the entire city general fund budget. So how did a city get to the point where it owes significantly more than it could possibly pay? The same way a lot of people do: They borrowed irresponsibly.
Mr. MILLER: It's like taking something from one credit card to another credit card to another credit card, and you keep getting a little more and a little more.
KEITH: The facility was built in the early 1970s and had problems almost from the start. In 2003, regulators shut it down because of environmental violations. But it was deeply in debt at the time, and city leaders decided the only way out was to sell more bonds and rebuild and expand the incinerator.
Harrisburg Mayor Linda Thompson was on the city council at the time. She says the former mayor and various outside consultants made a strong case.
Mayor LINDA THOMPSON (Harrisburg, Pennsylvania): They sold us of the fact that this incinerator, once it's retrofitted, would make enough money to pay the old debt and the new debt. Unfortunately, that didn't happen.
KEITH: Instead, the contractor left the project unfinished and filed for bankruptcy. So the city and the Harrisburg Authority were out another $125 million and still didn't have an operating incinerator. That led to another round of bonds, which gets us back to today.
Mayor THOMPSON: Someone should have said, enough. And it wasn't. So here we are.
KEITH: Mayor Thompson says she's working to secure a forbearance agreement to give the city time to figure out what to do next.
Mayor THOMPSON: Bankruptcy is not on the table as a first option. It will be the last option if we have to get there. But right now, we're working on quite a number of other steps before we get to bankruptcy.
KEITH: Thompson is talking about signing a long-term lease for city parking structures - a plan that would bring in a big chunk of cash now, but would eliminate a future source of revenue. And most significantly, she's hoping to restructure the city's debt, sort of a refinance on a large scale. She says this is about saving the city of Harrisburg.
Tamara Keith, NPR News.
MONTAGNE: And you're listening to MORNING EDITION, from NPR News.
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