Wednesday, February 17, 2010

Harrisburg or bust

or do I mean Harrisburg Bust?

Bond Buyer has the latest on what could be big news in Pennsylvania, let alone public fiance markets and in particular any future bonds the city here would ever want to put out… boring talk about the ability of the Harrisburg Authority to make bond payments coming due very soon. As mentioned here previously, it appears that the City of Harrisburg is on the hook for this indirectly… something which has sparked talk from the city officials of a potential Harrisburg bankruptcy in the not too distant future.

Always wondered what a potential bankruptcy for Pittsburgh would mean.. and it is something I have talked about publicly. People have tried to tell me it would not be allowed in Pennsylvania, but that is an almost meaningless argument.  If now state capital is publicly talking about the potential of going bankrupt!!!! I think the repercussions would be even greater. Would the legislative denizens of Harrisburg allow their municipal colleagues down the street to reach that point??

So I don't really think it will happen.... but the open talk of it all is a new paradigm in itself.  It has the bond markets and the bond insurers in particular pretty spooked I have to believe.


Anonymous Anonymous said...

We need strong leadership to bring the city into and through an orderly bankruptcy. The only other solutions are a state bailout or a federal bailout, neither of which seem immediately forthcoming.

Any bad publicity from the process will be wiped out when virtually every large city defaults on its debt in the next 100 years. Guaranteed-benefit pensions were an absolute killer.

Wednesday, February 17, 2010 2:31:00 PM  
Blogger Conservative Mountaineer said...

Municipalties should be allowed to avail themselves of bankruptcy proceedings so as to provide for wholesale changes in all contracts and agreements, especially Union contracts, staffing, pension obligations and the like. What makes public sector employee agreements, obligations and employment so sacrosant? Answer - Nothing!

Thursday, February 18, 2010 5:57:00 PM  
Blogger C. Briem said...

and debt? You don't mention debt at all. Bankruptcy usually addresses debt first and foremost. I don't think the ratings agencies are overly worried about pension liabilities being cut. They are fearful of debt being liquidated.

Thursday, February 18, 2010 6:07:00 PM  
Anonymous MH said...

Certain types of debt, like general obligation bonds, are usually at the front of the line to get set to zero, aren't they? At least in situations where there is no group with 'equity.'

If I don't hold some of those bonds through a pension fund of some sort, I must hold some similar enough that they would drop in price if Pittsburgh tanked. Of course, when the banks stocks crashed, my retirement funds lost money and everybody had to pay more taxes (or will have to) to bail out the banks. Pittsburgh goes bankrupt, I'd still lose money in bonds, but I might actually catch a break on taxes. I say, "Go ahead."

Of course, if Pittsburgh did go bankrupt, we'd never be able to build an arena for a professional basketball team or spend $600 million to connect East Liberty and Morningside by light rail.

Thursday, February 18, 2010 8:24:00 PM  
Blogger Conservative Mountaineer said...

@C. Briem: Oops. You are correct.. I left out debt.

Friday, February 19, 2010 9:34:00 AM  

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