Saul Ewing lawyers assist in bond transactions to eliminate Harrisburg debt and to allow Harrisburg to avoid bankruptcy
Saul Ewing lawyers played a pivotal role in a series of transactions that permitted the City of Harrisburg to avoid Chapter 9 bankruptcy and to eliminate over $300 million in debt that threatened to drag the Capitol of Pennsylvania into federal bankruptcy proceedings. Timothy Frey, a partner in the municipal bond group, and James Gkonos, special counsel in the Insurance Practice Group, represented Assured Guaranty Municipal Corp., the bond insurer for much of the municipal bond debt that threatened to force Harrisburg into bankruptcy like Detroit, Michigan and California cities such as Stockton, Bakersfield and Vallejo. Since 1998, the Harrisburg Authority had issued over $300 million in guaranteed revenue bonds to refurbish the trash to steam incinerator for the City of Harrisburg. The City of Harrisburg had guaranteed payment of that debt. In 2009, The Harrisburg Authority began to default on debt service payments. Shortly after, the City of Harrisburg defaulted on its guaranty obligations. In 2010, Harrisburg was declared to be in financial distress by Governor Corbett under Act 47, and in 2011, a receiver was appointed by the Governor to devise a work-out plan.
After years of negotiations and litigation, on December 23, 2013, the existing incinerator debt and city guarantees were discharged, and Harrisburg was infused with over $35 million in funds to cure a cash shortfall and to provide it fiscal stability for at least five years and potentially far into the future through a series of complex agreements and transactions. These transactions included:
- Sale of the incinerator to the Lancaster County Solid Waste Management Authority and its issuance of revenue bonds to finance the transaction;
- Issuance of tax exempt municipal bonds by the Pennsylvania Economic Development Financing Authority to finance the acquisition of municipal parking facilities and entering into qualified management agreements with a commercial parking operator; and
- Entry into a series of settlement agreements with the City of Harrisburg, Dauphin County, The Harrisburg Authority, The Harrisburg Parking Authority, and various creditors of the incinerator facility and the City that provided for the settlement and payment of claims.
The Governor of Pennsylvania and the Receiver for the City of Harrisburg have hailed these transactions as ground-breaking as Harrisburg is one of the few major cities that has managed to avoid bankruptcy and craft a workable long-term consensual solution. Click here to view a copy of the Commonwealth’s press release announcing the completion of these transactions.