Harrisburg is finished paying a multi-million dollar debt that has burdened the city for more than a decade.
City leaders said Thursday they had submitted a final $8.3 million payment to bond insurer AMBAC this week. Harrisburg has for years owed the insurance company money for covering a series of bond payments the city could not make.
“For me, this has been a particularly annoying and costly debt, because we’ve had the ability to pay this off for many years,” Harrisburg Treasurer Dan Miller said at a news conference.
In 2011, Harrisburg was unable to pay back some people who bought bonds issued in 1997. An insurer stepped in to pay them instead, but the city then had to pay that insurer back. With interest, it owed as much as $26 million just two years ago.
According to payment history provided by the Treasurer’s office, the city under former Mayor Eric Papenfuse made only the minimum payment on an initial $17 million advance from AMBAC. Miller said the company charged the city as much as a 6.75 percent interest rate all the while, which quickly made the balance balloon to a much larger number.
“So they’ve been making a killing on Harrisburg,” Miller said. “Unfortunately, we couldn’t get the prior administration to pay this off.”
“We could have saved Harrisburg millions…but it’s better late than never,” he added.
Mayor Wanda Williams said her administration authorized spending of some of the city’s savings cash to pay off the insurer once and for all. She praised city leaders for the accomplishment Thursday.
“They had the courage to do what’s right for the people of Harrisburg,” Williams said. “Instead of kicking the can down the road, we had the opportunity to pay off this debt. And we did just that: $20 million dollars in debt payments over three months.”
The final payment marks the last in a series of financial recovery measures the city has implemented since the days of its late former Mayor Stephen Reed. His decades-long tenure has been routinely criticized for spending hundreds of millions of dollars on things like a now-shuttered trash incinerator and Civil War memorabilia.
That spending and other mismanagement pushed the city to the brink of insolvency by the time Reed left office in 2010, which means even with its final debt payment to AMBAC, the city is still not on firm financial footing. City leaders said Harrisburg will remain in a state program known as Act 47 that’s designed to help it get there.
At the same time, the city has made financial progress in the last decade: Harrisburg emerged from financial receivership, in which the state oversees most of a government body’s finances, in 2014.
While it still owes money to vendors who worked on things like its street light improvements in 2015, Williams and other city leaders said Harrisburg now has more money to spend on things like new garbage trucks and street paving. Williams added “some” streets will be repaved as soon as this year, and dismissed the possibility of issuing more municipal bonds to pay for the work.
“We don’t want to go back into debt, we just paid off debt,” Williams laughed.
“We haven’t spent money in the last 10 years, but we’re going to make sure we’re financially stable before we start on a project,” she added.
Even after the debt payment, city treasurer Miller said Harrisburg has $17 million in its savings account.
