When Wall Street Bankers and Politicans get into bed with each other the taxpayer ends up getting f*cked.
Harrisburg, Pa., having nearly exhausted its cash reserves making two debt payments Monday, will receive a $3.8 million windfall from a terminated interest rate swap contract.
The Harrisburg Authority, the regional agency that owns the debt-laden incinerator project that helped push the capital city into a fiscal crisis, agreed late Monday to wire the money to the city's water fund, said William Cluck, a member of the authority board.
The city has been struggling to make payroll over the past several months and said Monday that it hadn't fully funded its payroll obligation for next week. It also faces $2.9 million in overdue payments to a range of vendors supplying products ranging from paper goods to fire-truck tires, said Chuck Ardo, spokesman for Mayor Linda Thompson.
If the city wants to use the new cash infusion to address those needs, the mayor and city council must reallocate the money from the city's water fund to the general fund.
"Hopefully we will get this into the general fund and we are able to take care of some of the city's pressing financial problems," Ardo said.
City officials also are trying to have Harrisburg accepted into a state oversight program for distressed municipalities, which would allow the city to get short-term funds.
A hearing on the city's application for the program, called Act 47, is scheduled to resume Wednesday with more testimony from the public. The state will make a decision on whether to designate Harrisburg as distressed after the close of the hearing.
The city's $288 million debt burden from a problematic incinerator--more than four times its annual budget--and political dysfunction have brought Harrisburg to the brink of insolvency.
Harrisburg has this year missed more than $10 million in debt payments tied to the project and is being sued by the bond insurer Assured Guaranty Ltd. (AGO) and Dauphin County, which made the payments to bond holders.