City of Harrisburg, PA Review and Analysis of Harrisburg Financial Recovery Plan: Strong Plan (26 August 2013) REPORTED PREPARED ON SEPTEMBER 16, 2013 This document has been developed for the City Council of Harrisburg, Pennsylvania. The contents of the document are the property of the City, and may include forward looking statements that are subject to market, economic, and operational variation. The past operational performance is no indication of future results. Furthermore, the underlying data are provided by external council and advisors, and we do not guarantee the accuracy of the information provided by external parties. ALVAREZ & MARSAL PUBLIC SECTOR SERVICES, LLC Columbia Square 555 Thirteenth St NW, 5th Floor West Washington, DC 20004 William V. Roberti , Managing Director (203) 400‐1623 [email protected]
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City of Harrisburg, PA
Review and Analysis of Harrisburg Financial Recovery Plan:
Strong Plan (26 August 2013)
REPORTED PREPARED ON SEPTEMBER 16, 2013
This document has been developed for the City Council of Harrisburg, Pennsylvania. The contents of the document are the property of the City, and may include forward looking statements that are subject to market, economic, and operational variation. The past operational performance is no indication of future results. Furthermore, the
underlying data are provided by external council and advisors, and we do not guarantee the accuracy of the information provided by external parties.
ALVAREZ & MARSAL PUBLIC SECTOR SERVICES, LLC Columbia Square 555 Thirteenth St NW, 5th Floor West Washington, DC 20004
William V. Roberti , Managing Director (203) 400‐1623 [email protected]
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Table of Contents
I. EXECUTIVE SUMMARY ......................................................................................................................... 3
Purpose of Report ............................................................................................................................ 3
Findings and Conclusions ................................................................................................................. 4
II. BALANCED BUDGET .............................................................................................................................. 9
Overview of Strong Plan’s Multi‐Year Forecasts .............................................................................. 9
Capital Reserve Account Assumptions........................................................................................... 35
Analysis of Various Agreement(s) Term Conditions and Debt Financing Proposal ....................... 36
Findings and Conclusions ............................................................................................................... 38
VI. APPENDIX ........................................................................................................................................... 41
APPENDIX A. Documents Reviewed ............................................................................................... 41
APPENDIX B. Index of Major Creditors ................................................................................. 42
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I. EXECUTIVE SUMMARY
Purpose of Report Alvarez & Marsal (“A&M”) was hired by the City of Harrisburg, PA (“City”) to prepare an expert
report related to the August 26, 2013 Receiver’s Strong Plan (“the Plan”). This due diligence analysis
describes our findings based on the information obtained, and addresses the completeness and
reasonableness or, conversely, the deficiencies and inconsistencies perceived in the materials
below. Major components of the analysis include:
Review of the assumptions and projections used to develop the balanced budget for 2013‐
2016 contained within the Plan
Validate the accuracy and reasonableness of the assumptions and projections relating to the
balanced budget for 2013‐2016
Develop a flow of funds analysis that delineates the sources and uses of proceeds derived
from the sale of city assets
Review the debt financing proposals for the parking transaction along with underlying
assumption and the cash flow assumptions
In completion of this report, A&M reviewed various documents, models, proposed debt financing
schedules, term sheets, proposed agreements and other confidential materials related to the underlying
assumptions in the Strong Plan. Our professionals had repeated due diligence conferences with the
Receiver and his financial advisors.
A&M discloses that our existing business relationships with current creditors, financial partners and
bondholders involved in this Plan did not impede or influence in our analysis, due diligence and report
conclusions.
Appendix A provides a listing of the documents provided by the Receiver and the Special Counsel to the
City Council in review and analysis. A&M agreed to a confidentiality agreement related to the uses and
transfer of the documents. A&M worked with the Receiver and his Financial Advisory Team to
understand the budget, the plan assumptions, and the transaction terms.
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Findings and Conclusions
The Harrisburg Strong Plan is a complex financial blueprint with critical initiatives and funding proposals
to address the City’s financial and economic challenges. The revised recovery plan has a number of
solutions that necessitate accommodations of the City, its employees, and major financial and
operational partners.
At the same time, City Council must understand the short and long term benefits, financial attributes
and risks related to the Plan.
Many of the terms and final contractual and transaction financial details of the Plan are still being
developed. City Council needs to understand the major components and cash‐flows to forge a workable
resolution for Harrisburg's future.
While A&M has some remaining questions and potential recommendations to the City and Receiver
related to the major sale and lease transactions, A&M does not see any major hurdles, assumptions or
projections that should prohibit City Council from moving forward in the notice of approval of the plan
concepts.
A&M reviewed the “financial snapshot” multi‐year budget and the various transaction cash flow
projections and assumptions. We held a number of meetings and calls with members of the Receiver’s
Financial Advisory team to understand the major components of the Plan to test the validity and
reasonableness of the assumptions. This analysis is based on estimates, assumptions, and information
gathered from our research related to the Proposed Revised Recovery or Strong Plan. The sources of
information and bases for the assumptions are stated herein. We believe that the sources of
information are reasonable and valid.
Since our recommendations and conclusions are based on estimates and assumptions that are
inherently subject to uncertainty and variation depending on evolving events, we do not represent them
as results that will or will not be achieved. Some assumptions inevitably will not materialize while
unanticipated events and circumstances will occur; therefore the actual results achieved may vary
materially from the examples and conclusions herein. The terms of our engagement do not provide for
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reporting on events and transactions that occurred subsequent to our research completed on
September 15, 2013.
A&M finds that the Plan provides immediate financial rewards and risks that the Council and community
must be aware of to address the future long term sustainability of the City.
Plan Opportunities & Benefits
Eliminates existing debt service funding demands on the General Fund with the defeasance of
the Incinerator Recovery Facility $212.7 million debt
Provides for immediate cash relief to the 2013 Budget to allow for $8.3 million to close the
projected budget deficit and $5.0 million to meet cash‐flow and aging vendor payments
Provides for expanded revenues (Earned Income Tax, Parking Tax, and Other Parking Revenues)
to address operating needs over the next four years
Targets monies for key City challenges and priorities
• $6.0 million for OPEB funding
• $10 million for economic development to improve the local tax and employment base
• $10 million for needed City infrastructure and deferred maintenance needs city assets
Provides budget funding for increasing employee health care and related insurance needs
Provides monies to fill critical city positions and reduced extraordinary operating expenses (e.g.,
overtime due high vacancy rates)
Plan identifies other potential operating and revenue initiatives for the City Council to develop a
long term financial plan
Plan Risks & Challenges
The Plan is only the first step for the City to address financial sustainability. Future operating
initiatives are needed to address potential financial challenges in future years.
Proposed Plan is a work in progress. Final terms for the Asset Transfer Agreement are still in
development and will require ongoing review
Employee wages and benefits being reduced by $4.0 million including $1.8 million for IAFF which
is not confirmed
Need for continued $5.0 million appropriation for the General Assembly for public safety
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The sale of the Incinerator does not fully cover the liability leaving $208 million in debt
The transaction remains highly sensitive to interest rates, and further interest rate increases
could erode value
Parking System Revenues and Operating Expense targets may not be achieved leaving the last
payments in the waterfall at highest risk
The subordination of City payments puts the City more at risk
The structure of debt creates increasing costs in the out years, requiring future revenue growth
One of the major consequences for the City in not moving forward with the proposed transactions is
that the Harrisburg would be faced with the immediate need to file bankruptcy. The current state of the
City’s cash flows does not allow the City to continue as usual with the existing labor, debt and operating
costs and without new revenues or further spending reductions.
While the Revised Recovery Plan may have some unpopular and unique strategies, the City has limited
options to ensure cash solvency by year end. Chapter 9 bankruptcy would have a damaging impact on
the City for years to come.
The cost of bankruptcy is expensive and will cause the City to have to spendhigh amounts in legal and
advisory fees. Bankruptcy will impact to the City’s ability to borrow low interest rate monies in the
future. Underwriters, rating agencies, credit enhancers, and bondholders may be fearful debt
obligations will not be met in future years.
Secondly, a proposed bankruptcy will also have a negative impact to the community including the
potential loss of business and traveler tourism, new home sales, and loss of future economic
development. As a result many of the revenues created by the City from taxes collected on the
community, bankruptcy may cause a longer recovery period.
Most importantly, the Strong Plan is only one of many added financial strategies and initiatives that City
Council will need to complete to achieve financial sustainability. The City will need to continue to
examine operational and program efficiencies and revenue opportunities to address the long term
needs for the City of Harrisburg. The Receiver has identified a number of initiatives that the City should
pursue. At the same time, as the financial control and accountability of the City’s finances returns to the
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City Council, the entire governing body needs to ensure that they have a strategic direction and mission
for the community including a long term financial sustainability plan. With several of the Strong Plan
initiatives expiring over the next three to six years, it is important that the City Council be proactive in
the development of a long term plan to address the challenges of health care costs, employee staffing
and pay incentive, aging infrastructure and other program priorities to enhance the economic viability of
the City.
Based on our analysis, we have developed a number of overarching findings and conclusions:
In light of the current unbalanced budget and bleak financial cash‐flow forecasts immediate
short and long term financial measures are needed.
The Plan’s assumptions and forecasts seem reasonable and valid. While the projections and
assumptions are conservative, several of the revenue and expense projections are not in place
which is essential to balance the budget.
• Continuation of $5.0 million in funding from the General Assembly for public safety
operations. The Baseline Budgets include the public safety appropriation and it is
essential that this supplemental funding continues. If the state funding is not
appropriated, then additional spending reduction or revenue enhancements initiatives
will be required.
• $1.8 million in personnel spending reductions from IAFF contract settlement.
• Elimination of the Incinerator debt and restructuring of other existing debt service
requirements.
The transactions provide immediate cash flow needs to address critical outstanding bills,
backlog of payments, address the timing of revenues, and resolve working capital needs.
Future budgets should be based on the priorities of the City that are within the resource
constraints of the current forecasts. Forecasts need to include current and future impacts of
health/medical costs on current employees and current/future retirees.
The Parking Transaction monetizes (i.e., trade‐off of upfront cash infusion in lieu of future cash
flows) future cash flows of the various parking garages and lots
The Transaction is highly sensitive to interest rates. Future delays in the timely closing of the
transaction could cause reductions in the overall value of the transaction.
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The Parking Transaction includes a number of moving parts, legal requirements, and concessions
that have been made in order to consummate a deal. As a result, the transaction has become
complex and challenging to communicate to the various constituents.
Based on these findings, the City should be aware of the following items related to risks and structure of
the transaction:
• What level of risk is being transferred to the City in the transaction?
• How much of the current financing structure is dependent on future revenues?
• What concessions were required, and does the term sheet reflect all of these
concessions?
• How will the City’s expected payments be affected by the concessions?
• What happens if the surplus revenues are not achieved?
• What happens if the operating income is negative?
• Will the excess funds draw from the Capital Reserve account?
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II. BALANCED BUDGET
Overview of Strong Plan’s Multi‐Year Forecasts
The City’s General Fund Budget was presented in the Plan is balanced. The Plan includes various revenue
enhancements and expense reductions to balance both the current and future year budgets.
While the FY 2013 to FY 2016 General Fund Budgets are balanced, meaning that if the revenue
projections are met and spending is contained with the expense assumptions, the City will have
sufficient revenues to meet all of its required operating expenses over the next four years.
The Plan did not provide multi‐year
detail budget line items for major
spending purposes (e.g., personnel,
supplies, services, capital, and
other) or detail for the major sources of revenues. We did note however that the Plan did include
conservation revenue and cost inflationary adjustments.
The Plan provides a balanced General Fund budget for the next four years including providing resources
for several key priorities. The below table summarizes the major key components of the balanced
Estimated Baseline Revenue 50,000,000$ 50,526,000$ 50,130,520$ 50,354,710$ Plan New Revenue Sources 19,100,000$ 9,800,000$ 10,342,000$ 10,885,260$ Total General Fund Revenues 69,100,000$ 60,326,000$ 60,472,520$ 61,239,970$
Estimated Baseline Spending 51,330,000$ 52,326,000$ 53,372,520$ 54,439,970$ Plan Cost Reductions/Payments 17,770,000$ 7,600,000$ 7,100,000$ 6,800,000$ Total General Fund Expenditures 69,100,000$ 59,926,000$ 60,472,520$ 61,239,970$
Net Operating Income (NOI) Enhancement Assumptions
After estimating the base net operating results, the Harrisburg First team developed a series of NOI
enhancements to further expand the overall Net Operating Income, and thereby increasing the debt
capacity made possible through the parking transaction. The NOI enhancements included:
• An increase in the meter rates from $2 to $2.50 per hour
• An increase in the monthly rates charged to the Commonwealth of $10 per year over the first
five years
• A $0.5 million reduction in annual management fees
• Removal of HPA consulting fees
• Reduction of the timeline to reduce HPA labor
• Stopping the City escalation for the $1.5 million
• Subordinating the City’s $1.5 million payment after six years
• Bringing on new parkers to the parking system through DGS
Finally, one of the considered NOI enhancements is not included and remains under consideration:
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• The Harrisburg First team is also considering replacing the midtown meters to bring the same
technological efficiencies to those meters as that are being realized throughout the rest of the
parking system.
As a result of these NOI enhancements, the operating income is expected to increase by an additional
$1.3 million to $2.8 million in the first five years. Once the City’s payments stop escalating and the $1.5
million payment is subordinated, the total debt service made possible by the transaction is increased
and the total debt service payments are able to be expanded allowing for the size of the transaction to
be increased. These steps were necessary to make up for the reduction in interest rates. With these
additional enhancements, the NOI is increased by $4.7 million in year 6 taking the gross operating
margins from 64.2 percent to 83.3 percent. Without the subordination of debt, the debt service
coverage ratios would have limited the size of the transaction to the point that return of proceeds would
have to be cut further, likely causing the City to have to accept reduced upfront payments.
Parking Meter Fees and Enforcement Revenue Assumptions
The parking meter fees are set to increase by an additional 36 percent in 2015 on top of the five year
growth of 53.1 percent relative to the 2009 baseline. After year 3, the parking transaction revenues
were estimated to grow by 3 percent. The reason that these estimates are reasonable is that meter
rates are projected to increase by 100% from $1.50 to $3 within the CBD and by 50% from $1 to $1.50
for other areas. Additionally, a permit parking system is expected to be put in place for residents in
order to move parkers from the neighborhoods into the paid parking spots. This action should move
parkers from the “free” spots around the City to the paid meter or paid garage lots. These parkers are
currently outside of the parking system and represent a new source of revenues.
As it currently stands, the inexpensive meter rates coupled with the low level of enforcement
incentivizes parkers to stay on the streets to risk the ticket. In February 2003, WSA conducted a Parking
Rate Study and concluded that meter violations are relatively high (almost 39 percent for the survey
period) and enforcement relatively low (only 9.5 percent of the violations received a parking ticket). The
planned increase in enforcement activities over the next two years should send the message that the
days of inexpensive parking with lax parking oversight are gone, and that paid parking will be the norm
moving forward. The enforcement revenues are estimated to increase by approximately 14 percent in
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2014 and an additional 39 percent in 2015. Thereafter, the enforcement revenues were estimated to
grow by 3 percent.
The reasons that these estimates in the first two years are conservative are twofold. First, the meter
violation and late payment penalties are expected to roughly double from $14 to $30 for a meter
violation and from $11 to $20 for a late payment penalty. Secondly, the new parking management
intend to implement a significant enforcement push in the first two years to reinforce the message that
the parking system of meters and enforcement has changed.
While the enforcement revenues are likely to be the most conservative estimates in the parking system
forecast for years 1 and 2, the future year assumption that enforcement revenues will remain at the
level achieved could be high if citizens follow the learned behavior and move to the parking garages. If
the spike in enforcement is followed by learned behavior to move to the garages, the straight line
growth after a significant 2 year increase could be an aggressive assumption. Given the poor baseline
parking violation data, these estimates are hard to predict. We expect that the initially conservative
estimates are likely to balance out the aggressive future year growth assumptions, as the enforcement
revenues settle into a new steady state level. Since the revenue projections involve significant
assumptions that could materially alter the forecasts, the City will need to make a determination on the
level of confidence in the revenue projections.
Operating Expenses Assumptions
Under the HPA, total operating expenses included garage, surface lot, and street meter operation and
maintenance costs. The model under the parking transaction will trade off in house management for an
outside asset management and parking management service. When comparing the historic growth rates
with the prior five year comparison, the operating costs are growing at a similar, but slower, overall pace
compared to the prior five year period. From 2004 to 2009, the total operating expenses increased by
$1.0 million or 20.2 percent. By comparison, the total operating expenses from 2009 to 2014 increased
by $1.0 million or 15.7 percent.
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Operating Expenses FY 2004 FY 2009 FY 2014
System O&M Costs $5,041,900 $6,060,500 $5,017,259
Management Fees $0 $0 $1,241,059
Total Operating Costs $5,041,900 $6,060,500 $6,258,318
While the 5‐10 year trend in operating expenses from 2004 to 2014 appears to be in line as a starting
point, there is a substantial reduction of 42.5 percent in legacy HPA labor staff labor after year 1. This
reduction, coupled with increases in the remaining categories, creates an overall system reduction of 8.9
percent in year 2. Thereafter, the parking system costs are projected to grow at 3 percent per year. The
primary concern is that the 42.5 percent reduction in staff could be aggressive given the City’s plans for
stepped up enforcement during this time and the high degree of cost reduction. The justification for the
reduction is that standard parking intends to leverage the existing technologies and staff to manage the
program. Our concerns with this assumption are twofold: that the cuts in labor could be too deep, and
as a result, the City’s ability to generate the planned additional enforcement revenues could be
jeopardized.
The Harrisburg First parking system will be managed with a two pronged asset manager and parking
manager using AEW and Standard Parking respectively. This is a unique solution to the management,
and is currently in the process of being implemented by AEW and Standard Parking in Cincinnati. After
the HPA team has been replaced, there will still be a need for overall “business” (versus asset)
management, however, the incentive structure, and risk transfer should match the compensation that is
being received by AEW.
Furthermore, the combined use of a parking and asset manager appears to carry high costs. Similar
business management solutions use a percentage of revenue structure to align the business interests of
the manager with the other stakeholders. Using this as a benchmark, the combined team would carry
costs of 11.5 percent of total revenues (9.7 percent and 1.8 percent for the asset and parking manager
respectively). This compares to revenue managers on previous airport deals that have received 5‐6
percent of system revenues.
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As a result of the analysis of the high fees being charged by the asset manager, the receiver entered into
negotiations with AEW to bring down costs to 5‐6% of total revenues. Furthermore, we recommended
that the performance management fees be subordinated to the City payments, and the receiver is in
active negotiations to ensure that the City be paid before performance award fees. The subordination
will enable higher debt service utilization, and will align the managers with the City. Finally, A&M’s
recommendation alternative payment structures be considered including payments based on
percentage of parking system revenues, were taken to align the interests of the asset manager with the
interests of the City.
Capital Reserve Account Assumptions
The Capital Reserve account provides a fund that can be used to maintain the parking structures, but the
governance of this account remains a concern. The level of the Capital Reserve account appears to have
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been driven more by negotiations than by forecast spend. The reserve account should have a reasonable
balance, but not be too high, else both the City and the creditors could be tying their hands for the sake
of a bloated reserve account. By bringing down the maximum size of the Capital Reserve account from
$35 million to $15 million, the transaction size increased, the City and creditors will be paid sooner from
surplus revenues, and a more rapid buy down of debt will occur, benefiting all parties.
The Capital Reserve account must also have the proper governance to avoid the possibility of shifting
operating costs into capital buckets in order to achieve performance awards, thereby, hiding the true
cost of operation. The governance structure should include consideration for what happens if the
surplus revenues are not achieved, how much flexibility the management team will have to use the
funds, how the City will limit the funds use for “operating‐like” expenses, and establish the procedures if
the operating income is negative. As an example, if the system has negative surplus revenues, will the
excess funds draw from the Capital Reserve account?
Analysis of Various Agreement(s) Term Conditions and Debt Financing Proposal
The current parking transaction remains steeped in negotiations with creditors and the underlying
management company. As a result, the underlying components of the parking system model remain in
flux, and are changing with each negotiation. For this reason, many of the underlying documents are not
aligned. This has been further complicated by the substantial reduction in the value of the transaction
that was caused by the significant upward movement in interest rates.
Since May 2013, interest rates have increased significantly with the 10 year Treasury bond rate
increasing from 1.63 percent on May 1st to 2.91 percent on September 11th (a 78.5 percent increase in
rates). The spike in rates caused the price of bonds to fall precipitously, with the Municipal Bond Buyer
index falling from 131.9 on May 1st to 107.8 on September 11th. The 18.2 percent fall in the bond index
provides a reasonable proxy for the impact on the overall parking system transaction, which on a $281.2
million deal, would have suffered from a $51.4 million loss in total transaction value. This loss of value
eroded any transaction cushion, and created the need to return to the negotiating table with the
creditors.
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As a result and the substantial loss associated with the recent spike in interest rates, the City has had to
agree to concessions that were not planned for at the outset of the deal. These concessions change
rapidly, causing the term sheet to be misaligned with the current deal. As an example, as part of the
negotiations on behalf of the City, there have been three types of proceeds that are being carved out for
the benefit of the City: upfront proceeds from the sale, ongoing senior operating and lease payments
($1.5M + $0.5M), and a split of surplus funding between the creditors and City after setting aside $15
million in Capital Reserves.
The fluid nature and need for concessions, creates challenges with maintaining proper oversight of the
environment. As an example, there were several concessions related to the City payments that needed
to be made in order to hold the transaction together. The City was asked to remove the escalation factor
after year 6 from the senior payment, and the City payment was subordinated in the priority of payment
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to allow for the level of debt necessary. Due to the recent nature of these changes, the updated terms
are reflected in the Harrisburg First forecast cash flows, but are not reflected in the term sheet.
While the limitation of growth on the “senior” payment and the parking ground lease after 6 years will
limit future City earnings streams and have an increasing impact in the future, this will be offset slightly
by the surplus revenue payments after the Capital Reserve account has been topped up. Furthermore,
without some level of concession from the City, the overall deal would not be possible, given the
substantial reduction in bond prices that have occurred over the past four months.
Given the tenuous and rapidly changing nature of the negotiations, any one stakeholder without an
agreed to settlement (e.g., the IAFF labor contract) is able to unravel the entire deal based on not
coming to the bargaining table. For this reason it is important to push into the bargaining to show the
good faith negotiations, and carefully check the terms and conditions of the deal as they are being
finalized.
Findings and Conclusions
Based on our analysis we have developed a number of overarching findings and conclusions related to
the parking transaction.
General Findings
• The Parking Transaction monetizes future cash flows of various parking garages and lots in order
to relieve the City of a substantial burden generated as a result of the incinerator debt.
• Transaction is highly sensitive to interest rates, and the delay in time to close the transaction
substantially reduced the overall value. Further erosion due to interest rates could further
reduce the value and potentially derail the transaction.
• The parking transaction includes a number of moving parts, several legal requirements, and
concessions that have been made on both sides in order to consummate a deal. As a result, the
transaction has become increasingly complex and challenging to communicate.
Parking System Revenues
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• The 5 to 10 year trend of revenues for garage and lot fees appears to be a reasonable starting
point for 2014. The initial growth rates beyond 2014 are a little higher, primarily driven by
increases in garage operating and capital costs.
• The enforcement and meter revenues grow in excess of 30 percent for the initial two years,
before stabilizing at 3 percent growth thereafter.
• The level of uncertainty in the revenue projections is a risk for the City and the Creditors. The
enforcement and meter increases are based on limited underlying data resulting in a higher
variability in the forecast. The estimates seem conservative, but the confidence in the
underlying data is not strong enough for an accurate prediction.
Parking System Operating Expenses
• Trend in operating expenses appears to be in line as a starting point but the one‐time reduction
in labor costs in 2015/2016 could be aggressive, and/or impact generation of enforcement
revenues.
• The incentive structure and risk transfer of the AEW transaction should match the compensation
being received by AEW. Since this is being negotiated as we speak, the validation was
challenging.
• The AEW transaction has been simplified based on a percent of revenues versus an annual fixed
fee
• Governance of Capital Reserve account remains a concern.
• Level of Capital Reserve account driven more by negotiations than forecast spend. Account
should have a reasonable but not too high balance. More rapid buy down of debt will benefit
both parties.
Terms and Conditions
• Components of the transaction are changing on a daily basis, creating challenges with
maintaining the proper oversight of the environment.
• The City will receive three different types of funding:
o Up front proceeds from the sale
o Ongoing senior operating and lease payments ($1.5M + $0.5M)
o Split of surplus funding between the creditors and City after setting aside $15M in
Capital Reserves.
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• As a result and the substantial loss associated with the recent spike in interest rates, the City has
had to agree to concessions that were not planned for at the outset of the deal.
• The fluid nature and need for concessions, creates challenges with maintaining proper oversight
of the environment. As an example, there were several concessions related to the City payments
that needed to be made in order to hold the transaction together.
o The $1.5 million City payment stopped escalating after Year 6.
o The City payment was pushed behind debt payments (i.e., subordinated) in the priority
of payment to allow for the level of debt necessary.
o These changes are reflected in the Harrisburg First forecast cash flows, but are not
reflected in the term sheet.
• The limitation of growth on the “senior” payment and the parking ground lease after 6 years will
limit future City earnings streams, with increasingly larger impacts in future years. This will be
offset slightly by the surplus revenue payments after the Capital Reserve account has been
topped up.
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VI. APPENDIX
APPENDIX A. Documents Reviewed
• Asset Purchase Agreement between The Harrisburg Authority and Lancaster County Solid Waste Management Authority (8/23/2013)
• City of Harrisburg Cost of Issuance for Parking and Resource Recovery Facility • City of Harrisburg Liquid Fuel Tax Summary • City of Harrisburg’s Overall Flow of Funds Summary • City of Harrisburg’s Projected Parking Transactions 2014‐2050 (9/3/2013) • City of Harrisburg’s Strong Plan (8/26/2013) • Desman Associates’ Financial Review of the Long‐Term Concession and Lease of the Harrisburg
Public Parking System (8/28/2013) • Harrisburg First’s Cash Flows Report for City of Harrisburg (August 2013) • Harrisburg First’s DGS Parking Agreement for the City of Harrisburg (2/12/2013) • Harrisburg First’s Financial Model for City of Harrisburg: Commonwealth Structure (5/24/2013) • Harrisburg First’s Report on Commonwealth Bonds for 20 years, County/AGM bonds (at Amount
Meeting Coverage Requirements), 100/70 Allocation, Turbo from Back (8/23/2013) • Harrisburg First’s Report on Commonwealth Bonds for 20 years, County/AGM bonds (at Amount
Meeting Coverage Requirements), 100/70 Allocation, Turbo from Back (9/6/2013) • Harrisburg First’s Sources and Uses of Funds Report for Parking Monetization (7/1/2013) • Harrisburg First’s Summary of Proposed Terms of Asset Transfer of Harrisburg Parking
Authority’s Parking System (8/16/2013) • Harrisburg Parking Authority Parking System Rates Graphed for Report to Receiver (August
2012) • Harrisburg Parking Authority Transactions to City of Harrisburg Plus Projections (1999‐2011) • Public Resources Advisory Group’s Report on Harrisburg Parking Authority’s Cash Defeasance of
Outstanding Debt (8/21/2013) • Summary of Realized and Projected Net Revenues, Parking Rates, Operating Expenses, Net
Income, Debt Service, and Capital Expenditures Responses from Interested Parties 2012‐2041 (WilburSmith Business Valuation, Boenning & Scattergood, Harrisburg Forward, Harrisburg First, Harrisburg Parking Partners, Keystone Parking Group, National Development Council, NW Financial Group, Morgan Stanley Infrastructure Partners, and Ontario Teachers’ Pension Plan)
• WilburSmith Associates’ Business Valuation of the Harrisburg Parking Authority Parking System (3/7/2011)
• City of Harrisburg FY 2013 Budget • Year to Date Actuals – Period Ending July 31, 2013 • Receiver Budget Projections and Monthly Cash Flow Statements • Collection Bargaining Agreements and Summary of Major Contract Changes • Waste Agreement between Harrisburg and LCSWMA