Harrisburg council seeks bankruptcy: Update

UPDATE: As expected, Harrisburg Mayor Linda Thompson, Gov. Corbett and State Rep. Jeffrey Piccola, the Republican who represents the city and its Eastern Shore and southern suburbs in the state Senate, are opposing Harrisburg City Council's attempt to evade takeover by filing for bankruptcy protection. AP story here. 

LAST NIGHT: The city of Harrisburg, state capital of Pennsylvania, has filed for bankruptcy protection from its creditors under seldom-used Chapter 9 of the U.S. bankruptcy code, says Mark Schwartz, the Bryn Mawr lawyer hired by Harrisburg City Council members last month.

"I filed the petition by fax tonight" at U.S. Bankruptcy Court in Harrisburg, Schwartz told me by phone.

The city council, which he said is empowered to seek federal bankruptcy protection under Pennsylvania's Act 47 governing distressed municipalities, seeks to stay creditor lawsuits by its bond insurers and others who may seek to be paid before other creditors. The city faces large payments for a troubled trash incinerator project and other spending it would have difficulty funding from its current budget and taxes.

Harrisburg's finances are also the subject of proposed state laws that could force asset sales, city employment cuts and other cost-cutting actions. A majority on Council has sought to block what members consider a state takeover as they push a commuter tax on state workers and other financing plans.

Harrisburg Patriot-News says here that Council approved Schwartz's bankruptcy petition in a 4-3 vote tonight.

Harrisburg is one of a number of municipal governments that have been downgraded by credit rating agencies during the prolonged economic slump as they struggle with funding for public utilities or private development project finance schemes. Others including Collingswood, NJ, and Scranton and Lackawanna County, Pa. 

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