By Jon Hurdle
GETTYSBURG, Pennsylvania, Aug 31 (Reuters) - Harrisburg, Pennsylvania, will not make a $3.29 million payment on general obligation bonds due Sept. 15 because it doesn't have the money, a spokesman for the city's mayor said on Tuesday.
However, bondholders will be paid through insurance on the bonds.
Interim chief of staff Robert Kroboth wrote to the Bank of New York Mellon, which represents bondholders, on Monday to say the city's financial situation would not allow it to make the payment on 1997 series D and F bonds, said Chuck Ardo, a spokesman for Mayor Linda Thompson.
'Unfortunately...the financial situation precludes us from making any transfer to fund these debt-service payments at this time,' Kroboth's letter said, according to Ardo.
The city sold the two series of GO refunding debt in 1997, totaling $55.5 million and insured by Ambac Assurance Corp , according to an official statement posted on the Municipal Securities Rulemaking Board's EMMA Web site.
Joan Allman, a first vice president at Ambac, said if Harrisburg fails to make the payment, 'we will pay in full.'
The debt is separate from $288 million the city and its municipal authority owe on a trash incinerator. That debt threatens to bankrupt Pennsylvania's capital city, force bond defaults, or prompt the sale of city assets, according to city officials.
The city is working on a plan to pay its debts, Kroboth's letter said.
'The city has been developing a comprehensive plan to meet its debt obligations in the near future,' the letter said.
Ardo said the general obligation bond payment could have been met if Harrisburg City Council had accepted a plan by Mayor Thompson to raise water and sewer rates as part of the current year's budget.
'A block of the council has opposed every initiative that the mayor has proposed and created a deeper hole for the city,' Ardo said.
The council also declined to include debt service payments on the incinerator debt in this year's budget.
Ardo said he was not aware of any response from the bondholders to Kroboth's letter.
(Reporting by Jon Hurdle, additional reporting by Karen Pierog in Chicago; Editing by Andrew Hay and Diane Craft). Keywords: HARRISBURG PENNSYLVANIA/BONDS (karen.pierog@thomsonreuters.com; 1 312 408 8647; Reuters Messaging: karen.pierog.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
GETTYSBURG, Pennsylvania, Aug 31 (Reuters) - Harrisburg, Pennsylvania, will not make a $3.29 million payment on general obligation bonds due Sept. 15 because it doesn't have the money, a spokesman for the city's mayor said on Tuesday.
However, bondholders will be paid through insurance on the bonds.
Interim chief of staff Robert Kroboth wrote to the Bank of New York Mellon, which represents bondholders, on Monday to say the city's financial situation would not allow it to make the payment on 1997 series D and F bonds, said Chuck Ardo, a spokesman for Mayor Linda Thompson.
'Unfortunately...the financial situation precludes us from making any transfer to fund these debt-service payments at this time,' Kroboth's letter said, according to Ardo.
The city sold the two series of GO refunding debt in 1997, totaling $55.5 million and insured by Ambac Assurance Corp , according to an official statement posted on the Municipal Securities Rulemaking Board's EMMA Web site.
Joan Allman, a first vice president at Ambac, said if Harrisburg fails to make the payment, 'we will pay in full.'
The debt is separate from $288 million the city and its municipal authority owe on a trash incinerator. That debt threatens to bankrupt Pennsylvania's capital city, force bond defaults, or prompt the sale of city assets, according to city officials.
The city is working on a plan to pay its debts, Kroboth's letter said.
'The city has been developing a comprehensive plan to meet its debt obligations in the near future,' the letter said.
Ardo said the general obligation bond payment could have been met if Harrisburg City Council had accepted a plan by Mayor Thompson to raise water and sewer rates as part of the current year's budget.
'A block of the council has opposed every initiative that the mayor has proposed and created a deeper hole for the city,' Ardo said.
The council also declined to include debt service payments on the incinerator debt in this year's budget.
Ardo said he was not aware of any response from the bondholders to Kroboth's letter.
(Reporting by Jon Hurdle, additional reporting by Karen Pierog in Chicago; Editing by Andrew Hay and Diane Craft). Keywords: HARRISBURG PENNSYLVANIA/BONDS (karen.pierog@thomsonreuters.com; 1 312 408 8647; Reuters Messaging: karen.pierog.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.