Harrisburg parking lease a 'near certainty'

A state appointed receiver will handle financial operation of Harrisburg, Pennsylvania, making a sale of its waste incinerator and lease of its parking a strong possibility.

A state appointed receiver will handle financial operation of Harrisburg, Pennsylvania, making a sale of its waste incinerator and lease of its parking a strong possibility.

A long-gestating privatisation plan in Harrisburg could become a “primary mechanism” to deal with a $300 million debt hole now that the beleaguered city has been prevented from filing for bankruptcy.

A Thanksgiving eve federal court judge ruling prohibited the Keystone State capital from using a rare bankruptcy measure, Chapter 9, to offload debt incurred from the money-draining waste incinerator, called “the major factor” for the ill financial health of the city in a report by Novak Consulting Group.

As a result of the ruling, cited as “disappointing” by local government, the Commonwealth of Pennsylvania will assume financial control of Harrisburg, implementing its Act 47 scheme.

The Financially Distressed Municipalities Act of 1987, also known as Act 47, can empower Pennsylvania to declare a municipality financially distressed, and restructure debt of the distressed municipality. In the past, Erie, Pa., and Altoona, Pa., have narrowly avoided Act 47.

William Leinberger, deputy city controller, called the waste incinerator sale and a parking concession a near-certainty. “The state, through the Act 47 plan, has made that clear,” Leinberger told Infrastructure Investor.

Harrisburg first sought Chapter 9 bankruptcy protection in October in a four-to-three city council vote in order to avoid a state takeover. The Commonwealth of Pennsylvania, however, countered that filing for bankruptcy would be illegal.

A June report by Novak Consulting that Harrisburg had commissioned had concluded a sale of the incinerator as well as a citywide parking garage concession was a needed financial provision to help the city navigate through its debt.

But the report disapproved of a lease of the incinerator to LambaStar Infrastructure Partners and Stockholm fund manager EQT Infrastructure, who made a joint offer for the incinerator – with a caveat that the parking concession was part of the purchase in a package deal.

LambaStar and EQT had floated $40 million for a 99-year lease on the incinerator as well as $215 million for a 75-year parking concession or $195 million for a 50-year parking concession.

The Novak Consulting report, in rejecting the LambaStar/EQT offer, insisted a deal should instead be made with the Lancaster County Solid Waste Management Authority, which offered $124 million for the incinerator.

The report stressed the incinerator would be better managed by a public entity.

Even with the lease or sale of the incinerator and a parking concession, Leinberger stressed “stranded debt” could remain, leaving potential for future leasing.

“Another problem the receiver will face is how to manage the structural deficit without annual parking garage income,” he said.