By Edith Honan
NEW YORK (Reuters) - Pennsylvania's debt-laden capital of Harrisburg is struggling to finalize a deal with its parking authority that will let it make a $3.3 million bond payment next month, officials said on Thursday.
Harrisburg -- a city of 50,000 about 100 miles west of Philadelphia -- is one of a handful of U.S. cities and counties that have teetered toward economic collapse in the wake of the 2007-'09 recession.
A news report on Thursday saying the city may miss a September 15 debt payment caused a brief sell-off in the stock market.
The city, which is also saddled with about $300 million in incinerator debt, is due to make a $3.3 million general obligation bond payment on September 15.
The money would come from an advance lease payment from the Harrisburg Parking Authority, the city has said.
But the deal is contingent upon the authority getting a bank loan of between $6 million and $8 million, as well as the City Council agreeing to extend the authority's lease of city land by 10 years, people familiar with the deal said.
The parking authority was due to meet later on Thursday, but put that meeting off by one week because the "commitment isn't together yet," said Harrisburg Parking Authority board member Corky Goldstein.
"We're 80 percent hopeful that by Thursday night of next week, when we have our meeting that we'll be able to vote on it, and have closing by mid-September," Goldstein said.
"When the city is having such problems financially, there is a ripple effect to banks thinking, even though from a legal standpoint we are independent, they're looking at the city of Harrisburg and seeing a lot of uncertainty," he said.
"Yes, we're having trouble," he said.
A representative from the potential lender, Metro Bank, had no immediate comment.
The second part of the deal -- that the City Council approve the lease extension -- is also not guaranteed, a spokesman for Mayor Linda Thompson said on Thursday.
"It is likely we will make the bond payment," spokesman Robert Philbin said. "We anticipate receiving that payment by the 14th of September and the bond paying will be made on the 15th."
But he added that the bond payment is "contingent upon the lease extension."
"If we do not receive those funds for any reason, we will not be able to make that bond payment on the 15th.
DEEPLY IN DEBT
At the root of Harrisburg's troubles is a complicated financing scheme used to fund a state-of-the-art revamp of its trash-burning plant that left the city deeply in debt.
The incinerator is owned by the Harrisburg Authority, a separate municipal entity, but the city and the surrounding Dauphin County guarantee much of that debt.
Last December, with Harrisburg facing the prospect of bond defaults, deep service cuts, or worse, Pennsylvania officials put the city under its so-called Act 47 law, which obliges faltering cities to implement plans to ward off Chapter 9 municipal bankruptcy filings.
But in July, the Harrisburg City Council rejected a state-approved rescue plan, which called on the city to sell the incinerator, renegotiate labor deals, cut jobs, and lease its parking garage.
The City Council is due to vote on a new plan, prepared by Mayor Thompson, at a special meeting on August 31.
(Reporting by Edith Honan; Editing by Jan Paschal)