Harrisburg, PA next?
Bankruptcy for Harrisburg finally?
The fiscal troubles plaguing Harrisburg, Pennsylvania have been well telegraphed in muniland. Reuters detailed the problems earlier this month:
Pennsylvania’s state capital, a city of 50,000 about 100 miles west of Philadelphia, has been flirting with bankruptcy as it struggles to pay off $300 million in debt incurred through a financing scheme used to fund a revamp of its trash-burning plant.
In July, the city council rejected a rescue plan put forward by a state-appointed advisor that called on the city to sell the incinerator, renegotiate labor deals, cut jobs, and sell or lease its parking garage.
Bloomberg reports today that Harrisburg is likely to miss a municipal bond payment on September 15. When a bond issuer misses a payment, rating agencies give them 30 days to cure the missed payment; if they are unable to do so, the rater declares them in default. Municipalities are not required to file a Chapter 9 bankruptcy because of this, but generally that is the sequence of events. So if Harrisburg misses the bond payment, it is likely they are headeded to the federal bankruptcy courthouse. Bloomberg reports:
Harrisburg may miss $3.3 million in general-obligation bond payments due Sept. 15, said Robert Philbin, a spokesman for Mayor Linda Thompson, in a phone call today.
The capital of Pennsylvania faces a $5 million deficit and is trying to arrange for a $7.5 million advance on a lease of municipal land to the Harrisburg Parking Authority.
“If the Parking Authority lease doesn’t go through, the city will not be able to make that payment,” he said.
More protection for municipalities
Fantastic news from the Municipal Securities Rulemaking Board, which has proposed new rules to protect municipalities when they issue municipal bonds. From Investment News:
Financial professionals who advise state and local governments would be required to make only those investment recommendations that are in the municipality’s best interests and could not receive “excessive compensation” under tough new rules proposed by an industry regulator.
The Municipal Securities Rulemaking Board, which oversees the $2.9 trillion municipal bond business, also would specifically prohibit municipal advisers from splitting fees with investment banks that provide investments or services to municipalities.
“We are proposing that municipal advisors be required to put the interests of state and local governments first,” MSRB executive director Lynnette Hotchkiss said in a statement. “This goes a long way in ensuring the interests of state and local governments are protected, and lays a solid foundation for disclosing conflicts of interest and establishing an appropriate duty of care for financial transactions.”
Bond Buyer: MSRB: Fair Dealing for MAs
Where do federal government dollars go?
Enjoy a little visual brilliance in the chart above called “Death and Taxes 2011.” You can click on it to see a bigger version. Here is what it is:
“Death and Taxes” is a large representational graph and poster of the federal budget. It contains over 500 programs and departments and almost every program that receives over 200 million dollars annually. The data is straight from the president’s 2011 budget request and will be debated, amended, and approved by Congress to begin the fiscal year. All of the item circles are proportional in size to their funding levels for visual comparison and the percentage change from both 2010 and 2001 is included so you can spot trends.
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