At first glance, the Harrisburg reorganization plan posted by state-appointed receiver William Lynch looks tough on lenders: It leaves Dauphin County, which helped guarantee Harrisburg's foolish borrowing, and its insurer, Assured Guaranty, to collect only about $210 million of the $300 million Harrisburg owes them, notes Tom Kozlik, boss muni bond analyst at Janney Capital Markets in Philadelphia.
So they're facing a 30 percent haircut, which is supposed to make the tax hikes and service cuts the plan also requires easier for citizens to bear.
Over time, though, the county and insurers "will potentially receive further payment from future parking operations" and other sources baked into Lynch's "Harrisburg Strong Plan," pending final approval by Commonwealth Court, Kozlik says.
And, after all, the bondholders are insured. So investors - the folks who bought the bonds - will get paid. This will make them less likely to demand that the politicians and fee-seekers who put the city so deep in debt face even belated punishment.
To Matt Fabian, publisher of the Municipal Market Advisors newsletter, Corbett stands in happier contrast to "nihilistic" Michigan Gov. Rick Snyder. In his rush to break the city unions for insisting the government pay for pensions that government promised, Snyder has unleashed a federal bankruptcy court that seems confused as to whether (for example) the Wall Street banks that sold the city money-losing interest-rate swaps should get paid more than ordinary bondholders.
Meanwhile, Michigan's receiver is trying to raise new funds for the city. Given the state's "hardball tactics," Fabian predicts dryly that its future borrowing rates "will be exceedingly high."
But Fabian isn't completely pleased by Pennsylvania. The state could have gone further in promising it won't let other cities default, he says. He predicts this unwillingness to commit will result in higher borrowing costs here, too.
That's what appears to be happening in Puerto Rico, where Gov. Alejandro Garcia Padilla's "willingness to make bondholder-favorable adjustments and policies has been unmatched by any other issuer," according to Fabian.
Too bad that investors have not rewarded this willingness. Borrowing costs keep rising. Employment, instead of recovering as promised, is falling. Puerto Ricans are again leaving to seek work on the mainland.
So the governor has an impossible choice. If he cuts spending, as he also promised, he's likely to be ousted by less lender-friendly critics. If he doesn't cut, he'll have an awfully hard time selling bonds to rebuild the island's highways on schedule this winter.
That's the problem for politicians who try to make deals with the market. Unlike ward leaders whose in-laws are meter maids or bailiffs, the market isn't loyal. It always wants to know: What are you doing for me today?
Contact Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com.