UPDATE 2-Harrisburg, PA, close to deal on debt-laden incinerator sale
* Sale may take months
* City hopes to get $130 mln, no amount finalized
* Detroit bankruptcy filing had no impact - receiver
Harrisburg, PA., July 24 (Reuters) - The city of Harrisburg, Pennsylvania, said on Wednesday it reached an agreement to sell the garbage incinerator that burned a $345 million hole in its finances and nearly left it bankrupt.
State-appointed receiver William Lynch said a deal is "imminent" to sell the incinerator to Lancaster County Solid Waste Management, a quasi-public authority, after stakeholders agreed to work together rather than fight each other.
Lynch wants to get $130 million for the incinerator, but a price has not been finalized, he told reporters at a meeting. He said that while a transaction is months away, he hopes to file terms of a deal next month with the court overseeing the city's financial recovery plan.
Harrisburg is at least $345 million in debt thanks largely to municipal bonds it guaranteed to finance upgrades to its problematic waste-to-energy trash incinerator. The city filed for bankruptcy in October 2011, but a court threw out the case after state lawmakers blocked it.
Lynch has been working on a plan, including the sale or lease of some assets, to pull the city out of its financial morass. He has previously said bankruptcy is still an option if the city cannot execute its recovery plan.
On Sunday, the city said it reaped nearly $4 million at the end of a week-long auction of thousands of Wild West artifacts, including a dentist chair used by gunslinger John Henry "Doc" Holliday. Former Harrisburg Mayor Stephen Reed amassed the items using millions of dollars of public funds to stock a proposed Wild West museum that never materialized.
Selling the debt-laden incinerator is critical for getting the city's finances back on track. Lancaster County's waste authority was chosen more than a year ago to buy the incinerator.
Lynch said that finalizing an incinerator deal would be a significant step in preventing a bankruptcy filing.
"All the stakeholders involved in the sale of the incinerator are in agreement," Lynch said. "While they realize this may be an imperfect situation for each of them, everyone understands a cooperative solution is most certainly in everyone's best interests."
Other stakeholders, including Dauphin County and bond insurer Assured Guaranty Municipal Corp., have financial claims that must be resolved before the deal can be closed.
The agreement could also include the lease of the city's parking garages, but that would involve a modification of its recovery plan and must also be approved by the Commonwealth Court, Lynch said.
One creditor, Covanta Energy Corp., struck a truce with Lynch in June over the company's lawsuit against the city. In 2007, the city hired Covanta to complete incinerator upgrades but allegedly did not repay the company for a loan that was part of the contract. Lynch had said that developments in the case were disrupting out-of-court negotiations with other creditors.
News of the deal comes less than a week after Detroit filed the biggest municipal bankruptcy in U.S. history. That filing had no impact on creditor negotiations in Harrisburg, Lynch said.
If Harrisburg can consummate a revised recovery plan in the months ahead, it could have a balanced budget by 2016 and be a "model for other cities," outgoing Mayor Linda Thompson said at a press conference.
"I fought hard to keep the city out of bankruptcy," she said.
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