Municipal Investments
3:44 pm
Mon May 13, 2013

$350M Incinerator Inspires Bill to Oversee Municipal Deals

A trash incinerator that helped bankrupt Harrisburg has prompted two Pennsylvania senators to roll out a package of bills that would better evaluate municipal investments.

Pennsylvania Sens. Rob Teplitz (D-Dauphin County) and John Blake (D-Lackawanna County) drafted the package to give the state more oversight over municipal financing deals.

“I’ve seen example after example, at all levels of government, from local volunteers to the sophisticated public officials that are running the largest agencies, the largest cities, the largest entities in this commonwealth, they’ve all lost money,” said Teplitz, who thinks there needs to be a higher standard when it comes to investing tax dollars.

Teplitz said the Harrisburg incinerator project experienced multiple setbacks but continued to expand due to a "tangled web of risky deals" that went unmonitored.

As a result, the project has cost Harrisburg and its taxpayers nearly $350 million, and the debt continues to grow. The U.S. Securities and Exchange Commission last week accused Harrisburg of violating anti-fraud rules for failing to mention its $2.3 million debt guarantee payments for the incinerator but did not impose a fine. The bankrupt city is now looking to sell the incinerator to Lancaster County to reduce the debt.

One bill in the package would make several reforms to the Local Government Unit Debt Act, aimed at limiting municipal authority over borrowing for such projects.

Blake said his legislation would also allow the State Ethics Commission to look at municipal financial dealings.

“There was really a disconnect in our statutory constructs that did not allow the State Ethics Commission to really have any authority to pursue such conflicts of interest situations,” he said.

The legislation also aims to ban the risky practice known as qualified interest rate management agreements, or “swaps,” for local governments, school districts, municipal authorities and the City of Philadelphia.

“We have to make sure that the taxpayers are protected, and clearly there is enough evidence to support a ban rather than just some minor tinkering or greater oversight or greater training,” Teplitz said.

Teplitz said he hopes municipalities across Pennsylvania learn a valuable lesson from Harrisburg’s financial woes and thinks the new bill will prevent other taxpayers from suffering the same consequences as those in the state’s capitol.