Harrisburg To Miss Incinerator Debt Payment Covered By Insurer - Wall Street Journal

(Updates with intention to skip December payments, meeting's outcome.)

       By Romy Varghese      OF DOW JONES NEWSWIRES    

Harrisburg, the cash-strapped capital of Pennsylvania, will again miss a payment on debt tied to its incinerator project, and bond insurer Assured Guaranty Ltd. (AGO) will cover the $1.2 million payment Nov. 1, officials from the city and insurer said.

Harrisburg this year has missed $10.5 million in debt payments related to the incinerator.

Dauphin County, which guarantees the bulk of the $288 million debt after the city, and Assured Guaranty have covered the obligations when the city has missed them. The two are suing Harrisburg to recoup the payments.

Harrisburg's financial condition precludes it from making the $1.2 million payment on the Series A of 2002, said Chuck Ardo, spokesman for Mayor Linda Thompson.

Next month, a $35 million payment that is guaranteed by the county and city is due, as is $7 million in payments from several 2003 bond series. Harrisburg officials have said they won't be making those payments as well.

Thompson, Dauphin County Commissioner Jeff Haste and others met Friday to discuss the looming debt payments.

No decisions were made at the meeting, according to Ardo. He described it as a "strictly informational meeting," in which options such as selling city assets were discussed, but not bankruptcy.

The city's debt burden from the incinerator--over four times its annual budget--and political dysfunction have brought Harrisburg to the brink of insolvency. Officials have struggled to make payroll and believe that acceptance into the state's oversight program for distressed cities would help persuade banks to provide short-term funds to pay workers and vendors for the rest of the year. State officials have about a month to decide whether Harrisburg should be in the program, although the city, which applied Oct. 1, hopes the announcement will be made more quickly.

-By Romy Varghese, Dow Jones Newswires; 215-656-8263; romy.varghese@dowjones.com

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