The state-appointed financial overseer of Pennsylvania's debt-laden capital city has a new plan to resurrect Harrisburg's finances and asked a state court Monday to approve it.
Harrisburg receiver William Lynch submitted the approximately 350-page plan to state Commonwealth Court in a bid to relieve hundreds of millions of dollars of debt and erase persistent budget shortfalls in the struggling city.
City officials suggested that lenders would walk away with less than they had sought, while the city would be required to sell the city's municipal trash incinerator whose debt dragged the city to the brink of bankruptcy and hand over its parking garages and lots to a state economic development agency.
That state agency could then issue tax-free bonds to help pay down the debt more cheaply.
In the Harrisburg Strong Plan, the receiver's office said it would wipe out the city's incinerator debt _ estimated at about $350 million and increasing $1 million per month. It said the proposal can be implemented because virtually all key parties have agreed to its terms.
"What the receiver asks this court to confirm is a plan that can and will be put in place if the financial transactions that are to fund the Strong Plan can be consummated without interference,'' the document submitted to court said.
Harrisburg had already piled $100 million in debt onto the incinerator by 2003 when City Council approved an expensive retrofit of the aging and polluting facility as an alternative to shutting it down. However, the retrofit went awry and took much longer and became much more expensive than originally forecast.
Harrisburg city residents now pay among the highest trash-disposal rates in the nation, while the facility can't generate nearly enough money to pay the debt.
A spokesman for the receiver's office declined to provide an estimate of how much lenders might lose.
Four City Council members had sought unsuccessfully to win federal bankruptcy protection in 2011 after they objected to suggestions that the city should be forced to pay the entire debt without sacrifices by lenders.
"I and my colleagues have consistently pushed for a global solution with shared pain,'' said one of the four, Brad Koplinski. "While I am cautiously optimistic, I believe that is what we have here.''
A spokeswoman for one of the city's biggest creditors, Dauphin County, said it is difficult to say whether the county will have to accept less than what it is seeking and some details still need to be worked out.
Another major creditor, bond insurer Assured Guaranty Municipal Corp. of New York, did not address the question in a statement.
One lender, CIT Capital USA Inc., sought more than $37 million, but would receive $21.5 million from the sale of the incinerator, the receiver's plan said. Meanwhile, the incinerator's operator, Covanta Energy Services Inc., sought as much as $26 million, but has reached agreement to settle all its claims for $9.5 million, the plan said.