A series by Bill Keisling
What happens when you run a city on borrowed bond money for decades?
A 130-page forensic audit report released in January 2012 by the Harrisburg Authority was meant to shed light on more than $300 million in debt incurred by the Authority on its ill-fated incinerator from the 1990s to the present.
Even though the debt was rolled over, the incinerator was already carrying a $80 million debt by 2000; changing this to “from the 1990s to the present” might be more accurate.
As such, the scope of the audit is limited. The report does not explore, for example, how and why the city of Harrisburg, it’s mayor and city council, since the mid-1980s got into the habit of floating bonds, rather than raising taxes, to build and run the city. It also does not explain how state regulators, or the public, allowed this to happen.
Even so, its findings are devastating. The report explains that various public entities, such as the Dauphin County Commissioner and Harrisburg City Council for years were all too eager to benefit from irresponsible borrowing. Today these same government bodies — the county commissioners and the city council — claim to be victims of what turns out to be their own fast-buck irresponsibility.
The report explains all too well how the bonding industry — its bond sellers, insurers, counsel, and regulators — kept the party rolling by cooking the books and otherwise turning a blind eye to unsound public financing that, at the end of the day and with foreseeable results, would bankrupt the city of Harrisburg.
Like the public entities at fault, the culprits in the bonding industry pretend in court filings today to be the victims of all this, when for years they were the beneficiaries, and the enablers — until the borrowed money ran out, and reality intervened.
The audit also raises questions about state regulators, in particular, those working for the Pennsylvania Department of Community and Economic Development (DCED) who were supposed to guard against all this.
Today, the DCED curiously is in charge of Harrisburg’s troubled financial recovery plan. DCED officials today want to quickly sell off Harrisburg’s assets to put the matter to rest.
DCED’s previous irresponsible role in all this is not understood, or studied, by a confused public.
The Harrisburg Authority, which nominally issued the bond debt in question, itself lost track of how it had gotten into more than $300 million debt over the incinerator. So in December 2010, the Authority commissioned the audit, which itself cost $1.2 million.
The resulting report, officially titled, “The Harrisburg Authority Resource Recovery Facility Forensic Investigation Report,” dissects much of how the staggering debt was accumulated in the last decade by the Authority.
The ill-fated incinerator at the center of the financial storm was originally built by the city for about $10 million in the early 1970s. By 2000, the report notes, the incinerator was carrying a debt load of about $80 million, though “the carrying value of (the incinerator) on the Authority’s books stood at $18 million.”
How a broken public facility valued at only $10 to $20 million ended up carrying a debt of $300 million is the story between the lines. This is the story that the forensic audit doesn’t directly address. But it’s the real story. (To be continued)
