Harrisburg paid off big debt early; what’s next for the city?

• Gabriela Martínez/WITF
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  I cover Latino communities in central Pennsylvania with a special focus on Reading and other cities where Spanish-speaking communities are growing rapidly. My stories explore the impact of language barriers, labor issues, the growth of Latino political power through grassroots efforts and many other things.
  
  I’m a native Spanish speaker myself. I grew up in the San Juan area of Puerto Rico. The English I know now, I learned mostly thanks to watching a lot of TV growing up, mostly Nickelodeon shows. I also learned Russian in college, which I perfected during my time teaching English in southern Siberia through the Fulbright Program.
  
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 Amanda Berg / For Spotlight PA

Pennsylvania’s state capitol building in Harrisburg, PA on Election Day 2022.

Harrisburg became debt-free in March, when it made its last $8.3 million payment to AMBAC, a bond insurance company that covered a series of bond payments the city could not make in 2011. In September 2022, the city finished paying off a $125.6 million debt dating back to the Reed Administration in 1997.

For the first time in decades, Harrisburg does not have to allocate funds for debt payments. City officials say this marks a new era for the city, since it will have more available funds to invest in capital improvements and more wiggle room to absorb the rising costs due to inflation.

The benefits of paying off the massive bond debt that saddled the city for years are reflected in this year’s budget. After making its last $8.4 million payment to the Debt Service Fund at the Bank of New York Mellon in 2022, the city was able to use the money that rolled off from last year’s budget, which no longer went into that debt, for the 2023 budget. The city allocated part of that $8.4 million for increasing police and fire department workforce and for the installation of ADA ramps along the state street corridor, which is a project that is slated for completion this year. Some of it was used to help absorb inflation costs.

The city’s decision to pay off its debt to AMBAC in 2023 saved it from twice-a-year debt payments that were set to balloon to roughly $1.9 million in March, which means Harrisburg would have been paying $3.9 million a year until about 2029.  So the city  decided to pay off the debt in two large payments: $12 million in December 2022 and $8.3 million in March before that payment increase.

“That’s money that can help shield us from rising inflation, fuel prices that have went up. We can hire additional staff. We can look at infrastructure improvements. We can look at capital projects, whether it’s work to be done on parks, whether it’s work to be done on roads, or physical buildings here, or additional programming, and nothing’s been set in stone yet,” said  Daniel Hartman, the city’s business administrator.

The city has a wishlist of projects it hopes to pursue with the money that will be freed up. Infrastructure projects and increasing police workforce are top priorities for the city, said Matt Maisel, spokesperson for the city.

“Our roads need paved, and we really want to focus on making roads safer,” Maisel said. We want to improve the infrastructure of our parks. Part of that is going to be done. We have a generous $13 million federal grant that we’re working with now, but that only solves part of the puzzle.”

Reducing blight is another priority for the city’s current administration. The city needs more funds for demolishing condemned properties.

“Being able to tear down those homes to make way for more affordable housing is one of the mayor’s top priorities,” Maisel said.

Harrisburg remains under Act 47, which is the state’s program for municipalities that are under financial distress. Paying off the bond debt was not a requirement for leaving Act 47, according to Audry Carter, chairwoman of the Intergovernmental Cooperation Authority for Harrisburg, but it does put the city in a better position to finance long-term projects.

“It certainly puts them in a much better stead if they do want to when they are able to go to the credit markets. And I think it allows them to plan for year-long cost improvements, rather than having to pay these massive debt payments once or twice a year,” Carter said.

The city still has to sign an agreement with the ICA in order to exit Act 47, and that agreement is pending, Carter said.

Note: this article was updated to reflect the correct grant amount the city received for parks.

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