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Aid plan helps Pa. capital avoid default

By Aaron Smith, staff writer

NEW YORK (CNNMoney.com) -- The state of Pennsylvania is helping the beleaguered capital city of Harrisburg stave off default with a multi-million dollar cash injection, temporarily postponing the specter of bankruptcy.

Gov. Edward Rendell said Sunday he would provide $4.3 million to Harrisburg. This includes expedited payments of $1 million in fire protection and $2.6 million for an annual payment to the municipal pension assistance fund.

It also includes $850,000 to hire a financial management firm, Scott Balice Strategies, "to develop a comprehensive plan for the city's financial stability and a $500,000 loan "to be repaid when the city's financial situation improves," according to a press release from the governor.

Without this assistance, the cash-strapped city was in danger of defaulting on its $3.29 million payment to bondholders on Wednesday. The city had issued those bonds to build a trash plant.

In May, Moody's knocked the city's rating on its general-obligation bonds three notched down to "B2," five steps below investment grade. To top of page

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