A debt recovery plan for Harrisburg, Pennsylvania was filed on Monday after a year of negotiations with creditors, unions and other stakeholders. The plan’s most important attribute is that it saves Pennsylvania’s capital city from declaring bankruptcy and it may fiscally stabilize the municipality for years to come.
The plan includes an extension of maturity of general obligation bonds and a reduction in labor costs through 2016. The city will still be responsible for substantial payments on its general obligation bonds. In 2013, the debt payment is set at $5,970,000 and at $7,670,000 for every year from 2014 through 2016.
The receiver has estimated that the city will also pay $3 million per year from 2013 through 2016 on existing loans or leases for equipment and short-term borrowings. This equals about 17 percent of the estimated general fund revenues of $60 million for 2014. This is a crushing debt burden for any municipality, but projections show it is sustainable through 2016 (page 73).
The plan is expected, starting in 2014, to receive general fund savings of approximately $2.4 to $2.7 million per year in labor concessions for the police union and AFSCME. This is a substantial concession, though the firemen’s union has not yet agreed to participate.
According to the Patriot News, “residents of Harrisburg would see no tax increases other than their already-increased Earned Income Taxes remaining at the 2 percent rate approved last year by City Council. They would also see metered and garage parking rates go up. Metered rates would increase to $3 per hour from the current $1.50 per hour.”