Friday, February 19, 2010
City Of Harrisburg Defaults On Municipal Bond : Vegas Monorail Default Looms
To start with, yes this falls somewhat outside this blog's turf, but the debt elephant at all levels, is becoming harder and harder to ignore--and believe me we have tried. As one blogger on here once said--it's the economy stupid.
"In Harrisburg, which is Pennsylvania's capital and has a population of about 47,000, a March 1 deadline is looming on a payment of $2 million out of the $68 million due this year for the financing of an incinerator plant. The facility has about $288 million in overall debt.
"Bankruptcy is inevitable," Mr. Miller says. "We are in a terrible bind." A budget passed Saturday by Harrisburg's city council didn't include any funds to cover the debt payments, according to the city clerk's office."
Meanwhile in Vegas, the non profit corp which operates the new monorail on the strip, has filed chapter 11 bankruptcy and is almost certain to miss upcoming payments on 600 million in outstanding Muni bonds.
"Ambac Assurance Corp., the bond-insurance unit of Ambac Financial Group Inc., is seeking to have the case converted to a Chapter 9 proceeding. The insurer contends that the company is akin to a municipality. A judge is set to decide on the petition later this month."
Perhaps the most interesting and important case was the Bankruptcy of Vallejo, Calif., which is trying desperately to renegotiate the labor contracts of city workers, after a sharp drop in property values crushed the tax base.
Who knows how this will all play out, but government debt and unfunded obligations must be an important factor in all our urban decisions.