York City continues to ward off the debt collectors by paying one annual bill very, very late.
For the fifth year in a row, the city has delayed payment of its minimum municipal obligation rather than run out of cash and risk legal action from lenders who can actually sue.
The city's MMO is basically a payment to itself -- an annual execution of a long-ago commitment to support retired employees with a pension fund.
More than $6 million was due on Dec. 31, 2012. So far, the city has paid just about $320,000 into the fund.
In fact, the city still owes $128,712 toward its 2011 MMO, according to business administrator Michael O'Rourke.
"It's a cash-flow issue," he said. "The fundamental problem's not fixed."
That problem, O'Rourke said, is an antiquated system of generating revenue on which the state requires third-class cities to rely.
Since 2008, the city has solved its cash-flow problem -- and avoided legal action from angry creditors -- by delaying its minimum municipal obligation. That's, quite literally, how the city avoids bouncing its checks, O'Rourke said.
But missing the state-imposed MMO deadline means interest starts to accrue at an 8 percent rate.
For example, the city owed more than $5 million to the pension fund in 2010. A late payment generated nearly $500,000 in interest, according to Public Financial Management, a consulting firm that highlighted the problem in a
report to the city in 2011.
Though interest owed must come out of city coffers, it is funneled into the pension fund.
A year ago, an auditor's report also urged the city to find a way out of its vicious cycle.
City officials also acknowledged in December that the city's MMO will increase significantly in 2015 when legislation that helped cities cope with the economic downturn expires.
O'Rourke has said it is too soon to know how much of a burden that will mean for the city. But, he's also said a $1 million increase is probably a best-case scenario.
O'Rourke said he anticipates the city will continue paying on its 2012 MMO in April, when tax revenue begins flowing into City Hall once again.
-- Erin James may also be reached at firstname.lastname@example.org.