FOR IMMEDIATE RELEASE: January 3, 2011
The Harrisburg Authority on Tuesday voted to hire an accounting firm and a law team to conduct a forensic audit on the debt that threatens to tip the city of Harrisburg, Pa., into bankruptcy.
ParenteBeard LLC and attorneys from Klehr Harrison Harvey Branzburg, working with Steven Goldfield from Public Resources Advisory Group, are expected to examine the steps that led the Harrisburg Authority to accumulate $288 million in debt on an incinerator project.
Among the questions that could be answered is why there was no performance bond on the $125 million bond sale in 2003 that financed the retrofit of the waste to energy facility, said Harrisburg Authority board member William Cluck.
The retrofit failed, and another company was brought in to save the project--leading to more debt being piled on. The city of Harrisburg, which guarantees the debt after the authority, failed to make about $50 million in payments this year and is being sued by the bond insurer Assured Guaranty Municipal (AGO) and Dauphin County, which covered the obligations.
In addition, Goldfield could explore if the Harrisburg Authority was overcharged on any swaps agreements, Cluck said.
The goals of the audit are to "perform a public service, clear the air, tell the story and if at all possible recover money," Cluck said, adding the information also could be useful should the city file for bankruptcy.
ParenteBeard is waiving its fee for "Phase One," in which the scope of the audit will be determined. Klehr Harrison Harvey Branzburg is waiving its initial consultation fee, and hourly compensation ranges from $240 to $400, according to Cluck.
-By Romy Varghese, Dow Jones Newswires