The Harrisburg incinerator was built in 1969 for $12.5 million that was debt financed. It was supposed to be a better, cleaner way to dispose of trash. But it has been instead not cleaner and a road to financial ruin.
The Wall Street Journal reports in an excellent article in today's Money & Investing section that Harrisburg has gone back to the capital markets to borrow at least 11 times since 1969.
The debt binge began in 1977 when Harrisburg borrowed $19.2 million for the incinerator; then $9.7 million in 1984; $25.3 million in 1985; $40 million in 1993; $55 million in 1998; $25 million in 2000; $17 million in 2002; $200 million in 2003; and $50 million in 2007. Outstanding debt is $310 million.
What did all that money buy? An incinerator that is worth $124 million, judged by the offer to buy it for that amount from the Lancaster County Solid Waste Management Authority. It also bought consultants and financiers.
Just between 1998 and 2003 $12 million went to financing costs, including fees.
Money was used for repairs and to install pollution contols, as once the incinerator was the dirtiest in America, putting large amounts of soot and dioxin and other toxics into the air.
Tons of money. All of it debt that needed the incinerator to work well and sustained high prices for waste disposal to have any chance of repayment.
Until Covanta recently took over its operations, the incinerator did not work at all for weeks or not well. Waste disposal prices are not high enough to finance the debt.
The incinerator is a lesson for all municipalities about the perils of debt and commercial enterprises.