The financial troubles and subsequent attempts/talks of a second run at filing for municipal bankruptcy in Harrisburg, PA have taken many twists and turns. The latest wrinkle came this week in the form of the first-ever Securities and Exchange Commission charges of security fraud, charges the city in question has agreed to settle, against a municipality.
The SEC alleges the city’s officials made a series of “misleading public statements” regarding its financial condition in various places: its budget report, annual and mid-year financial statements, the mayor’s “State of the City” address. The agency noted that such failures of compliance and “misstated” information left creditors with little in the way of reliable information when assessing the city, notably from 2009 through 2011.
“In an information vacuum caused by Harrisburg’s failure to provide accurate information about its deteriorating financial condition, municipal investors had to rely on other public statements misrepresenting city finances,” said SEC’s George Canellos. Harrisburg notably missed $13.9 million general obligation debt service payments on March 15.
In 2011, Harrisburg’s city council defied the wishes of the state and its own mayor by voting to file for Chapter 9 bankruptcy. Supporters of doing so said it would give the city leverage to renegotiate debt largely tied to a massively unsuccessful trash incinerator project, once so wrongly predicted to be a financial windfall for the city (the SEC listed debt from the project at $260 million), and provide more of a fair option to local taxpayers that didn’t want to take a hit out of proportion to that of investors. State and mayoral plans to sell off city assets such as parking garages and the incinerator operation, as well as raise taxes, were rejected by the council. Still, Harrisburg’s filing was rejected when a judge upheld a hastily-passed Pennsylvania law aimed at temporarily blocking third-level cities in the state from filing.
- Brian Shappell, CBA, NACM staff writer