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The huge debt burden, which cannot be restructured amid the U.S. credit crunch, threatens to strangle the operation with deficits and choke city trash customers with higher bills next year.
"We're still looking at the rate issue now," Harrisburg Authority Chairman James Ellison said following a board meeting Wednesday.
The authority owns the incinerator, which has been undergoing a $25.5 million overhaul to increase its efficiency.
But even with the plant's expected better performance when the repairs are completed early next year, the authority's financial experts say there's virtually no way the 800-ton-per-day burner can consume trash and generate steam and electricity fast enough to pay operating costs and cover its massive debt.
As a result, the authority's financial analysts have predicted the plant could be saddled with as much as a $13 million deficit by the end of 2009. This sets the stage for another steep increase in city trash rates.
Last year, city trash rates shot up $14.50 per month based on incinerator-related fees set by the authority, the city's utility agency.
While Ellison said Wednesday that he wasn't prepared to signal another major increase in the disposal fees just yet, he said the authority board would set its 2009 rates by the end of the month.
"I'm not issuing any warnings right now," he said. "We're still discussing rates."
The authority charges a disposal fee to the city, and the city passes it on to residential customers and landlords in the form of a per-unit disposal fee, the key component of city trash rates. The current residential disposal fee tied to the incinerator is $19.33 per month. The city adds a separate fee for curbside collection, for an overall monthly trash rate of $32.32.
In a bit of good news, the authority's financial team was able to find an institutional bond buyer for $32 million in 2003 incinerator bonds that come due Dec. 1.
Despite a historically tight bond market, authority investment banker James Losty said he has placed the bonds with Wells Associates Management, a division of Wells Fargo. The authority will pay a yield of 5.5 percent on the bonds over two years, avoiding a 10 percent penalty rate that it would have faced had no buyer been found.
The poor-performing incinerator, a financial burden for years, became a crisis in 2006, when a botched $80 million renovation was halted and the plant was left to run at two-thirds capacity.
By fall 2006, nearly $14 million in red ink from the foundering incinerator had spilled over to the city, sinking Harrisburg's budget into deficit and prompting city layoffs and a plan to sell off city assets, including museum artifacts and the Harrisburg Senators baseball team.
The plant continued to wrack up an estimated $1 million in monthly losses until its third burner was finally brought on line in March under a $55.5 million rescue plan approved by the city and Dauphin County last November.
To see more of The Patriot-News, or to subscribe to the newspaper, go to http://www.patriot-news.com. Copyright (c) 2008, The Patriot-News, Harrisburg, Pa. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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