Harrisburg's excessively late financial audits have put the Harrisburg Authority and the city in bad positions.



The Authority, which owns and operates Harrisburg's incinerator and the city's sewer and water systems, can't get its own annual audited financial statements finished until it can get numbers from Harrisburg's audits, which are three years behind schedule.





Not having the audits done is causing problems.

The Authority has to refinance debt on its water system this summer, but without its own updated audits, it can't proceed without at least getting slapped with higher interest rates on the the deals, said J. Marc Kurowski, authority chairman.

Not having audited numbers to show parties interested in leasing the water and sewer systems is holding up that process, according to the city receiver's office. Leasing those facilities is included in Harrisburg's state-sponsored recovery plan created to pay down

.

Additionally, not having the 2009, 2010 and 2011 audits completed is hurting the small chance the Authority has at getting investors to back federally mandated sewer and storm water improvement projects, Kurowski said.

Authority officials aren't the only ones worried about the ability to finance the sewer treatment plant improvements.

Harrisburg's six suburban municipal wastewater treatment customers are concerned that the Authority's bad credit could hit it with higher borrowing costs, which in turn could be passed on to the municipalities in service costs, said Scott Wyland, the attorney representing those customers.

Meanwhile, the cash-strapped city can't apply for grants or low-interest loans while the city's books aren't in order, City Councilman Brad Koplinski said.

"Making sure our books are done in a timely manner is vital in even being able to apply for federal and state grants," Koplinski said. "[Lenders] need to know that if they are giving low interest loans and grants to the city the money is going to be spent responsibly."

The city's finance director, Robert Kroboth, said a lack of manpower in his office has kept him from delivering the necessary paperwork to the city's auditor.

Harrisburg's receiver office is making it a priority to get the audits done, said Steve Kratz, spokesman for the state Department of Community and Economic Development.

City Chief Operating Officer

is leading the charge in getting the audits finished, the 2009 audit should be completed by June, and the 2010 and 2011 audits should be wrapped up by December, Kratz said.

The 2009 audit should have been finished by April 2010 and the 2010 audit by April 2011. The city's 2011 audit should have been completed last month.

The Authority got just enough information from the city to complete its 2009 audit, but its 2010 and 2011 audited statements hang in the balance, Kurowski said.

"We don't need the city's audit to be completed. If we could just get the parts related to the Authority done, we could get our financial statements and audits done," he said.

"The immediate thing is the water [bond refinancing] we are going through," Kurowski said. "It could cost us more money because of the lack of the audits. It could result in a higher interest rate for us." By September 2014, the Authority must complete a $45 million sewage treatment plant upgrade required under federal standards aimed at reducing pollutants flowing into the Chesapeake Bay.

The Authority used part of a $5.5 million state grant to move ahead with the design of the treatment plant improvements.

It is considering alternative project-funding solutions, but Kurowski said he could not discuss those options.

To finish the project on time, the Authority must seek bids by December and award contracts by January, said Shannon Williams, executive director.

Williams said it will take a cooperative effort with the state to get the sewage treatment plant project done.

Kratz said it would be up to the next receiver to address the sewage treatment plant project.

DCED official Fred Reddig is temporarily overseeing the receiver's office until a new receiver is con-firmed by the Commonwealth Court.

On Thursday, the court will hold a hearing to consider retired Air Force Maj. Gen. William B. Lynch for the receiver post filled by former receiver David Unkovic, who resigned March 30.

The fiscal recovery plan Unkovic left behind aims to pay down the city's mountain of debt created by a bungled retrofit of its incinerator and close its annual budget deficit.

Increased costs faced by the Authority for sewage treatment services have the potential to raise costs for Harrisburg's neighbors as well as city residents.

The city provides sewage treatment service to Susquehanna, Lower Paxton and Swatara townships and Steelton, Paxtang and Penbrook boroughs. The municipalities are Harrisburg's largest sewage treatment customers.

Last year, Moody's Investors Services downgraded the Authority's water bond rating because of the city's fiscal crisis and lack of audits.

It then withdrew the Authority's water bond rating.

It's almost impossible for the Authority to finance the sewage treatment plant improvements, and a separate, long-term $25 million to $35 million storm water drainage project it must take on to meet Environmental Protection Agency mandates, through traditional bond financing, Williams said.

The Authority hopes to complete several smaller water system projects with a $6 million low-interest loan it received from the Pennsylvania Infrastructure Investment Authority, but it couldn't close on the loan because of the late audits, she said.

The city's municipal customers, who are looking for $14.5 million to $15 million of sewage treatment credits already due to being overcharged for administrative fees, want to meet with the Authority and city to discuss assisting the authority with obtaining the financing to pay for treatment plant improvements, Wyland said.

"We've suggested it would be mutually benefi-cial for the suburban municipalities to meet with technical representatives of the city and Authority to address wastewater issues," Wyland said.

"As the city's largest customers," he said, "the suburban municipalities are interested in the city and Authority being able to address upgrades and get financing at an appropriate cost."