Harrisburg is paying off multi-million dollar bond insurance debt

March 16, 2023 | 6:06 p.m

Sam Dunklau Sam Dunklau is the Capitol Bureau Chief for WITF. Previously, he served as the Illinois state government’s NPR affiliate station WUIS in Springfield, IL.

Since 2015, Sam has been floating through the radio waves as a reporter, disc jockey and station manager. Raised in the small Midwestern town of Paw Paw, Illinois, he is a proud graduate of Augustana College.

Sam Dunklau / WITF

Harrisburg Mayor Wanda Williams (center), flanked by city leaders, speaks at the City Government Center March 16, 2023 by Rev. Dr. Martin Luther King, Jr., at a news conference announcing a bond insurance debt payment.

Harrisburg is done paying a multimillion-dollar debt that has plagued the city for more than a decade.

City leaders said Thursday they filed a final $8.3 million payment to bond insurer AMBAC this week. Harrisburg has owed the insurance company money for years to cover a number of bond payments that the city was unable to make.

“For me, this was a particularly annoying and costly debt because we’ve been able to pay it off for many years,” Harrisburg Treasurer Dan Miller said at a news conference.

In 2011, Harrisburg was unable to repay some people who had bought bonds issued in 1997. Instead, an insurer stepped in to pay them, but the city then had to pay that insurer back. Two years ago, it owed $26 million with interest.

According to payment history provided by the Treasurer’s Office, the city, under former Mayor Eric Papenfuse, made only the minimum payment on an initial $17 million advance from AMBAC. Miller said the company had been charging the city an interest rate of up to 6.75 percent all along, which quickly pushed the balance to a much larger figure.

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“So they committed murder at Harrisburg,” Miller said. “Unfortunately, we were unable to get the previous administration to pay this out.”

“We could have saved Harrisburg millions … but it’s better late than never,” he added.

Mayor Wanda Williams said her government has authorized the issuance of some of the city’s savings to pay off the insurer once and for all. She commended the city leaders for Thursday’s performance.

“They had the courage to do what was right for the people of Harrisburg,” Williams said. “Rather than kicking the can out onto the street, we had an opportunity to pay off that debt. And that’s exactly what we did: $20 million in debt repayments over three months.”

The final payment is the latest in a series of financial recovery measures the city has undertaken since the days of its late former mayor, Stephen Reed. His decades-long tenure was regularly criticized for spending hundreds of millions of dollars on things like a now-closed incinerator and Civil War memorabilia.

That spending and other mismanagement brought the city to the brink of bankruptcy by Reed’s departure in 2010, meaning that even with its latest debt payment to AMBAC, the city still isn’t on a solid financial footing. City leaders said Harrisburg will remain on a state program called Act 47 designed to help him get there.

At the same time, the city has made financial strides over the past decade: Harrisburg emerged from receivership in 2014, in which the state oversees most of a government agency’s finances.

While it still owes money to vendors who worked on streetlight improvements in 2015, Williams and other city leaders said Harrisburg now has more money to spend on things like new garbage trucks and pavement. Williams added that “some” roads will be repaved later this year and dismissed the option of issuing more municipal bonds to pay for the work.

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“We don’t want to go back into debt, we just paid off the debt,” Williams laughed.

“We haven’t spent any money in the last 10 years, but we’ll make sure we’re financially stable before embarking on any project,” she added.

Even after paying off the debt, City Treasurer Miller said Harrisburg had $17 million in its savings account.