Without the debt provision in the $65 million budget, the state capital may miss a March 1 payment of $2.072 million, a rarity for a municipal bond issuer.
Joyce Davis, a spokeswoman for Mayor Linda Thompson, confirmed the council's decision -- taken at a special session on Saturday -- and said the mayor is not commenting for now on the implications of exclusion of the debt payments from the budget.
The council also defeated a plan to sell city assets to help pay down the debt which is guaranteed by the city on behalf of the Harrisburg Authority, a separate municipal entity that owns the incinerator. Council members also rejected Thompson's plan to raise property taxes and water rates.
The $2.072 million payment is the latest installment on a $300 million bond owed on the construction of the incinerator. An additional $637,000 is due on April 1.
City Controller Dan Miller said last year's payments on the incinerator were made from a debt service reserve fund that is now depleted.
Debt payments on the incinerator total $68 million in 2010, or more than the city's general fund budget of about $60 million, Miller said.
Miller said on February 9 he would "not be surprised" if Harrisburg fails to meet the March 1 payment.
Asked whether the city may file Chapter 9 bankruptcy as a way to get its debts under control, Miller said that was a "possibility."
Granpa's observation:
2010 Municipal defaults could get truly ugly given the current deficits of most states and especially the states of CA, NY and IL. Unlike the Federal Government, each state is not able to simply print more money! Tim Geithner and Helicopter Ben do not make house calls.
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