In 2010 the city had failed to honor its guarantees #6815

In 2010 the city had failed to honor its guarantees on The Harrisburg Authority (THA) debt. (THA
is a component unit of the city.) In 2011 Harrisburg filed for bankruptcy; however, the
bankruptcy petition was denied by the court. The State of Pennsylvania appointed a receiver for
the City of Harrisburg in 2011 to help with the city's economic recovery. The following three
paragraphs are taken from the mayor's transmittal letter in the 2012 CAFR report. Subsequent
to the three paragraphs are two bar charts providing 10 years of information on General Fund
balance and net position and a table providing 5 years of debt performance information. For
perspective, 2009 was the year the City went from a 2008 statement of net position, where
assets exceeded liabilities by $46,178,883, to a deficit in 2009 of $227,092,975. It was the year
in which the contingent liability for The Harrisburg Authority Resource Recovery Facility debt
guarantees of approximately $264 million would be recorded on the City's financial statements
due to payment defaults on that debt.As of December 31, 2012, the City's liabilities exceeded its
assets by $277,261,834, representing a further decrease of net position of $28,092,042. As of
December 31, 2012, the City's governmental funds (General Fund, Grant Programs, Debt
Service and other Non-Business Type Funds) reported combined ending fund balances of
($76,414,768), a decrease of $23,421,231 from 2011.The General Fund is the City's primary
operating fund and the largest source of day-to-day service delivery. The Fund Balance of the
General Fund decreased by $23,569,137 for the year ending December 31, 2012, from the prior
year, primarily due to a significant drop-off in departmental earnings resulting from a $7 million
decrease in administrative service charge revenue from the Water and Sewer Funds, higher
expenditures incurred from a write-off of approximately $5 million of Incinerator amounts
receivable from under guarantee agreements for principal and interest previously paid by the
bond insurer, and an $11.2 million accrued liability associated with the settlement of
reimbursable sewer related amounts owed to several suburban municipalities.Requireda. Using
your library's resources, locate Craig S. Maher, and Karl Nollenberger. "Revisiting Kenneth
Brown's '10-Point Test'." Government Finance Review, October 2009, pp. 61-66. The City of
Harrisburg has a population of between 47,000 and 50,000 people. Based on its size, assess
the City of Harrisburg's debt performance relative to that of comparably sized cities.b. Later in
the mayor's 2012 transmittal letter she indicates that the city is confident of financial solvency
and the city is working toward an economically bright future. Based on the limited information
you have been provided, discuss your assessment of how financially solvent the city appears
and its timeframe for achieving an economically bright future.View Solution:
In 2010 the city had failed to honor its guarantees

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