Harrisburg, an ongoing saga

With Harrisburg, Pennsylvania, teetering on the brink of financial collapse, a previous hotly debated plan to sell or lease its parking property and waste incinerator might now come to fruition.

Harrisburg sought bankruptcy protection on Tuesday, October 11, when its city council in a four-to-three vote put forth the filing. Harrisburg, the capital of Pennsylvania, wanted to avoid a takeover by the Commonwealth of Pennsylvania. The state, however, has asserted the bankruptcy filing was illegal, and is moving forward with its planned takeover.

A state takeover would “almost certainly” result in the sale or lease of its parking property and incinerator facility, William Leinberger, deputy city controller, told Infrastructure Investor. 

Partial satisfaction

Leinberger said a sale or lease of the assets would “partially satisfy” the multimillion-dollar debt facing the city.

A federal bankruptcy judge is reviewing the filing, and is set to make a determination on November 23.

“I believe everything will depend on the ruling,” Leinberger said.

The city of 50,000 people is in debt to the tune of $310 million because of the cost of maintaining its waste incinerator, described in a report by Novak Consulting Group as “the major factor” for the ill financial health of the city. 

Novak Consulting, headed by Julia Novak, had been commissioned to coordinate a report on Harrisburg.

A November 23 ruling will mark the latest chapter in a winding, often contradictory, plan to sell city capital in order to bolster a financial recovery. 

Harrisburg had been advised to sell or lease its parking property and waste incinerator in a June report. At the same time, the report rejected a bid for the assets.

New York-based LambaStar Infrastructure Partners, along with Stockholm-based fund manager EQT infrastructure, had proposed to pay $140 million for a 99-year-long lease on the incinerator on the basis that they were also granted a parking concession.

LambaStar and EQT offered $215 million for a 75-year parking concession or $195 million for a 50-year term.

But Novak Consulting Group, while not wanting to “diminish the offer,” said a public entity and regional operator would be better suited to manage the incinerator.  The report instead named the Lancaster County Solid Waste Management Authority, which proposed a $124 million bid for the incinerator, as the ideal bidder.   

The advantage to having a public entity operate the incinerator is “significant,” the report concluded. 

City controller Dan Miller also opposed the LambaStar/EQT proposal, arguing that Harrisburg would lose revenue. Meanwhile, he also stressed that Harrisburg itself could raise parking fares and retain profits.

Miller, in particular, has been an outspoken critic of privatisation. In May, he railed against PPPs.

“It’s one way to do it. It’s not the only way and it’s not really the question. The question is what is the best course of action for the city of Harrisburg,” Miller said. “These people will try to bully us because they will make a tremendous amount of money on this.”

Novak explained that because the recovery plan had been rejected, there was “no immediate” plan for the city to lease its parking or sell its incinerator. She did remark that Tom Corbett, governor of Pennsylvania, signed senate bill 1151—which “essentially” authorised a state takeover.

The debate about privatising parking in Harrisburg had been long-running, and was reignited in June when the city received its financial report. The incinerator, meanwhile, has an annual debt service obligation that is $14 million in excess of its revenue, the report said.

“Political will” has been a key feature in Harrisburg—making the city a flashpoint in the US debate about investing private capital in public infrastructure.