The Harrisburg situation continues to drag along, with SEC investigations one of the newest wrinkles. But it has been a busy early part of the year for Dauphin County, where Harrisburg is located. Taking a look at the relationship between the city and the county is a microcosm of the interesting relationship between different levels of government and how they can interact from a bondholder’s perspective.
The county, which has filed multiple suits against the city, is allowing a project that was run by the county’s General Authority, a Hyatt, to miss interest and principal payments and effectively default.
Let’s be clear- the county as an entity is not defaulting: allowing this project to miss payments is fully within their rights. But one has to believe that if the county was in a stronger economic position, that projects like these would be rescued. The missed payment is not a huge surprise- the 2029 bonds last traded at a price of 50. And the county’s GO bonds still trade very strongly. But the fact the county did not step in, coupled with it’s announcement that it adopted a new set of swaps, could weigh on future project finance issuance in the future.
