Harrisburg, PA Brush with Default Centers on Incinerator

Date: September 8, 2010

Source: News Room

The City of Harrisburg, PA's waste-to-energy plant is at the center of the city's budget crisis involving a skipped $3.29 million debt service payment and fears that the action could precipitate trouble in the larger public finance markets. Unlike most of the nation's waste-to-energy plants, many of which were constructed in the late 80s and early 90s and whose bonds are mostly paid off, the Harrisburg Resource Recovery Facility is $288 million in the hole; the result of years of unrealistic expectations and poor decisions. The facility is owned by the Harrisburg Authority which owns all of the city's utilities and has missed debt service payments in the past. The city, which has backed the bonds, is on the hook for $68 million in debt service owed this year alone. That is more than the city's entire city general fund budget. The 800 ton-per-day plant which was built in 1972 and is the oldest in the country had numerous operating problems from the start. It was shut down in 2003 by regulators for environmental violations at a time when it was already heavily in debt. The city refinanced to pay for retrofits which went uncompleted when the city's contractor filed bankruptcy leaving the Authority with another $125 million and still no operating plant. More recently, Covanta Energy took over and has significantly improved its operations but the debt remains.

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