HARRISBURG, Pa. -- Pennsylvania's financially distressed capital city is seeking Chapter 9 bankruptcy, citing overwhelming debt, but Harrisburg's mayor and top city lawyer said the filing signed by a City Council member was not legal.
The petition docketed by U.S. Middle
District bankruptcy court Wednesday listed about $458 million in
creditors and claims, and said the city faced "imminent jeopardy" from
six pending legal actions by creditors related to a debt-saddled trash
incinerator.
"The city does not have the ability to pay
those money judgments or any significant portion thereof and still
provide health and safety services to its citizens and other essential government services," wrote attorney Mark D. Schwartz, who did not immediately return messages seeking comment.
The filing was signed by Councilwoman Susan
Wilson after a 4-3 vote by the council in favor of a resolution to
authorize it late Tuesday.
A spokesman for Mayor Linda Thompson said Wednesday the council lacks the legal authority to seek bankruptcy.
"There are procedural matters the solicitor
objects to, as far as how the resolution was handled, and the
quote-unquote hiring of counsel," said Robert Philbin, Thompson's
communications director. "The solicitor also says only the mayor, in
conjunction with the solicitor, can file for bankruptcy on behalf of the
City of Harrisburg."
Philbin said city solicitor Jason Hess believes the bankruptcy filing "will fall on its own."
The trash incinerator is owned by the
Harrisburg Authority, and Schwartz wrote that the principal amount the
city has guaranteed is about $242 million, with $65 million past due.
"The magnitude of that debt is sufficiently
large that it dwarfs the city's other liabilities," Schwartz wrote.
"Under the guaranties, the city would need to cover a combined $83
million of past due payments and the 2011 debt service."
The filing said talks with creditors were not likely to produce a solution.
"The size of the outstanding bond debt is
overwhelming," it said. "Negotiations are impracticable with one group
of creditors where negotiations with another key group have hit an
impasse."
The legal move comes the week before the state Senate is expected to take up a House-passed bill to authorize Gov. Tom Corbett
or his designee to assume many of the city's financial functions in
response to the stalemate between Thompson and a council majority over
how best to resolve the financial crisis.
That bill would empower the governor to
declare a state of fiscal emergency and install someone to make many of
the critical decisions about government spending and operations when a
third-class city such as Harrisburg can't work out a plan under the Pennsylvania Municipalities Financial Recovery Act, or Act 47.
Sen. Jeff Piccola, R-Dauphin, who helped
craft that bill, said state law prohibits third-class cities from filing
for bankruptcy. He said the City Council majority has acted recklessly.
"Rather than wasting precious time on
illegal filings and engaging expensive attorneys, the majority of City
Council should be about working with the Mayor and the Commonwealth to
resolve this crisis via the Act 47 process," Piccola said.
Harrisburg's Act 47 plan has been repeatedly rejected by the City Council.
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