Friday, February 12, 2010


If a city goes bankrupt in a snowstorm, does anyone notice?

CNN/Fortune talks about the bankruptcy status and situation in Vallejo, but mentions something else a lot closer to home.... namely talk that Harrisburg may file for bankruptcy within the month.  The blurb almost in passing is:
Harrisburg, Pa., could be in the ballpark. A top city official said this week that the capital of the sixth-most-populous state may file for protection from its creditors as soon as March 1.
I missed that entirely, though it was in the WSJ a few days ago. More in BusinessWeek yesterday.  Their bond rating has been dropped almost as far as the casino's here.. Some folks have argued with me in the past that Pittsburgh could never file for bankruptcy because 'Harrisburg' wouldn't allow it...  So what does it mean if Harrisburg proper is clearly talking about a straight up Chapter 9 Federal bankruptcy.

The thing that is really fascinating is why Harrisburg is in such a pickel.  Bad planning on their part?  Rampant spending or dropping tax revenues.  Maybe mounting pension liabilties or too many perks for their local pols?  None of the above. They are merely guarantors of part of a loan made by their housing authority for a trash incinerator of all things. There has to be a joke in there somewhere about the need to get rid of all the paper being generated by state government these days... should bring steady biz to a trash incinerator? 

But the fact that Harrisburg, the municipality, could fail because of spending by a local public authority really ought to get those folks in Harrisburg, the euphemism, thinking about the mess that is governance in Pennsylvania.  What potential debt is the city of Pittsburgh on the hook for via its public authorities?  Someone might want to add up what that comes to these days....  and then tell those folks at Moodys maybe. 

 I honestly can't believe the folks running the state would let the state capital do any such thing.  Someone will call in Act 47 on steroids or something.   but you never can tell what will happen in Harrisburg?  Sheer dithering is often the default path out there; yet those bond payments come due no matter.


Blogger n'at said...

I thought the authorities helped the city to take debt off the books. PWSA and SEA (now partially, but once wholly a city authority) have allowed the city to stay slightly ahead of their debt obligations. If only they had a Pension Authority, First Responder Authority and a Public Works Authority, then they could spread the encumbrance of funding basic services so thin it's transparent. No one could argue against transparency in government... but I digress.

If the appeal case bares fruit for Vallejo, do you think the Mayor will bite first or hold out until he's disallowed state assistance?

Friday, February 12, 2010 8:36:00 AM  
Anonymous johnnyg said...

Just as the "stigma" of filing for bankruptcy has all but disappeared for individuals and businesses, I think that Vallejo is making people re-think municipal bankruptcies. The most basic test for insolvency is an inability to pay debts as they come due. Harrisburg seems to fit that test. And, I understand the "well, taxes can always be raised argument", but that is future potential revenue, not revenue due now. I'm really coming around to the idea that more Chapter 9 test cases need to be filed. Of course, that would likely destroy the whole municipal bond market, but it would eventually adjust and price in risk, right?!

Friday, February 12, 2010 12:27:00 PM  
Blogger Grimace said...

These "authorities" really should be constrained by law. While they serve useful purposes in that they allow money to be borrowed for a specific project or purpose and keeps it off city books, the level of debt that are owed by the city, county and state are astronomical - but are concealed.

I bet if someone totaled up the debt and liabilities of all the authorities just in this area, they would pass out.

The city still has the Stadium Authority - which doesn't even have a stadium to manage!

Friday, February 12, 2010 1:09:00 PM  
Anonymous MH said...

We should build another stadium. PNC park sure helped the Pirates and solved all of our economic troubles.

Friday, February 12, 2010 3:01:00 PM  

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