HARRISBURG UNIVERSITY DEFAULTS ON ITS MARCH 1, 2012 BOND PAYMENT AND DAUPHIN COUNTY'S GUARANTY KICKS IN.

In 2007, Dauphin County gave a limited guarantee on Harrisburg University Revenue Bonds, Series B. According to the guarantee, the County agreed to back $1.5 million a year for 10 years beginning in 2010 on the $60,225,000 bonds. While the County's guarantee had not been triggered in 2010 or 2011, on January 6, 2012, Dauphin County Commissioner Chairman Jeff Haste and Harrisburg University's Vice President of Finance/CFO Duane Maun received a letter from TD Wealth's Vice President Joan Wallett's informing the parties that per the Guaranty Agreement and the Credit Support Agreement, TD Wealth was giving the Guarantor Dauphin County the required 55 days notice of the need to transfer its obligation of $1.5 million into the debt service account since Harrisburg University was deficient. Unwilling to adjust its conditions, TD Wealth stated it expected the funds to be deposited no later than 3 days before the March 1st due date. Therefore, on February 27, 2012, Dauphin County Budget Director Michael Yohe sent a memo to the Dauphin County Controller and Treasurer directing them to wire $1.5 million to TD Wealth "as a result of the default of the Harrisburg University on these payments." At that point in time, Dauphin County had already loaned the University $2.2 million since 2010 for "operating expenses," none of which had been paid back despite multiple deadlines to do so.

On February 29, 2012---two days after making the $1.5 million bond payment---Dauphin County and Harrisburg University entered into a Second Additional Loan agreement which included the previous $2.2 million Dauphin County loans as well as a new Promissory Note for $1.5 million as reimbursement for the County's bond payment. The total $3.7 million loaned to the University all came from Dauphin County's Unrestricted Gaming Funds and is due in full (principle and 1/2% annual accrued interest) by December 31, 2019 in the hopes that Harrisburg University is on more stable financial footing by then.

The agreement does not require any payments on the total loan amount.---Tara Leo Auchey

Photo: Natalie Cake