By Mark Shade
HARRISBURG, Pennsylvania (Reuters) - Pennsylvania's capital of Harrisburg is carrying more than $317 million in debt because a close-knit group of high-ranking public officials failed to vet the repair and retrofit of the city's incinerator, according to a forensic audit released on Wednesday.
The 133-page report, produced by the law firm Klehr Harrison Harvey Branzburg LLP and by accounting firm ParenteBeard LLC, focuses on the 2003 and 2007 bond deals that paid for the repair and upgrade of the incinerator to make it comply with federal clean air laws, as well as negotiations in 2005 and 2006 to sell the facility.
Harrisburg's incinerator debt has resulted in cuts to key services, and the city last year voted to sell the incinerator and lease several parking garages to help pay debts.
"The outcome of the retrofit, including the current debt crisis related to the city, reflects the accumulated effects of bad decisions on critical project issues, ranging from contractor selection at the outset to $60 million in debt taken on in 2007 when the facility was still incomplete and not fully operational," the audit says.
Barlow Projects Inc. was hired to determine the cost of retrofitting the incinerator in 2000 and later provided project design and bid management until it became the lead contractor on the project, the report says.
The audit, however, indicates the incinerator project would only have worked in a vacuum.
"It was critical to the success of the retrofit that Barlow complete the project on time and at the price agreed upon, and achieve the feasibility assumptions that supported the assertion that all (incinerator) debt, both existing and new, would be self-liquidating. Unfortunately, Barlow was unable to achieve any of these goals," the report says.
The audit also found that every public official involved in the project, which has pushed Harrisburg into a state takeover of its finances and potential bankruptcy, overlooked many red flags associated with the incinerator's upgrade.
Officials named in the audit include former Harrisburg Mayor Steve Reed and current Mayor Linda Thompson, who was chair of city council's public works committee during the retrofits. Thompson voted against a recent bankruptcy filing by the city council that was later overturned by a federal judge.
"The documents analyzed to date do not indicate to us that any of the parties, their employees or retained professionals adequately evaluated or assessed the potential risks associated with the RRF retrofit between 1999 and 2003, including the economics of the project," the audit says.
The forensic audit team says it looked at "tens of thousands of pages of documents" in its review, but only talked to people who agreed to do so. It said it could not compel cooperation with its investigation.
(Reporting By Mark Shade; Editing by Leslie Adler)