Harrisburg, Pa., defaulting on its bonds

harrisburg_pa.ju.top.jpgIs Harrisburg, the capital of Pennsylvania, the junkiest city in America? By Aaron Smith, CNNMoney.com staff writer


NEW YORK (CNNMoney.com) -- The capital city Pennsylvania is broke and will be skipping this month's multi-million dollar bond payment.

On Sept. 15, Harrisburg, Pa., was scheduled to make a $3.29 million payment on the bonds it issued to build a trash plant. But, the cash-strapped city doesn't have the dough.

"The city's budget is in deficit," said Chuck Ardo, spokesman for Harrisburg Mayor Linda Thompson. "We're looking for ways to trim the budget just to keep services going."

"Now the chickens have come home to roost," the mayor said in a statement released Wednesday.

In May, Moody's knocked the rating on its general-obligation bonds three notches to B2 -- five steps below investment grade. To put that into perspective: Moody's rating on Greece's government debt sits at A3 -- still investment grade.

"It's a warning to holders of bonds issued by financially stressed state and local governments," said John Lonski, chief economist for Moody's Investors Services. "Credit crisis is still with us."

And in, fact, many on city council have been floating the idea of bankruptcy.

However, Mayor Thompson chastised them for that and for shooting down her proposed increases to the real estate tax and water rate. She said that this "created a bigger hole" in the general fund and pushed the city closer to potential bankruptcy.

"There are some in this community who see bankruptcy as a silver bullet," said Thompson. "But, it's actually just a can of worms. The pro-bankruptcy cabal has blocked every attempt we've made to find a way back from the fiscal abyss."

She said the city "is developing a comprehensive plan to meet its debt obligations in the future."

Ardo said the mayor considers bankruptcy to be an "option of last resort," though it's not clear how the city will pull itself out of the red.

"Given the city's financial challenges, it's difficult to predict what will happen next," he said.

The city of Harrisburg is scouring its financial accounts as part of its drive for fiscal austerity. On Thursday, the mayor announced that the city was auditing a sanitation company for not paying $20,000 worth of waste disposal fees. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,356.87 288.00 1.69%
Nasdaq 4,644.31 96.48 2.12%
S&P 500 2,012.89 40.15 2.04%
Treasuries 2.15 0.08 3.72%
Data as of 9:28pm ET
Company Price Change % Change
Bank of America Corp... 17.26 0.54 3.23%
General Electric Co 24.66 0.17 0.69%
Apple Inc 109.41 2.66 2.50%
Cisco Systems Inc 26.81 0.22 0.85%
Microsoft Corp 45.74 0.58 1.28%
Data as of 4:04pm ET

Sections

That number will likely grow as the Obama Administration eases restrictions with the Communist country. More

Laurie Segall sits down with Reddit founder Alexis Ohanian and founder of AeroFS, Yuri Sagalov, to discuss how immigration reform could bring more skilled tech workers to the U.S. More

News startup The Skimm announced a new round of funding, 1 million active readers, and plans to expand into a 'lifestyle brand.' More

Congress waited until the last minute to decide what to do with a slew of expired tax breaks. They extended most of them, and a handful will affect individuals directly. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.