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Harrisburg, Pa. faces bankruptcy after failing to pay debts on a trash-to-energy incinerator, but most oppose the controversial move to file, advocating state invervention instead.
Harrisburg, a city of 49,500 people located in Dauphin County, faces a total debt burden of around $458 million, with $242 million owed for a trash-to-energy incinerator and $65 million in overdue funds.
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The debt is five times the city's general-fund budget. The city chose to file for bankruptcy to escape lawsuits that would force it to use tax money for the back-payments.
The city of 49,500, the seat of Dauphin County, faces a debt burden five times its general-fund budget because of an overhaul and expansion of the incinerator, which doesn't generate enough revenue.
"The city meets the 'generally not paying' definition of insolvency, because it has repeatedly failed to pay the guaranteed incinerator bond debt as it has become due," Harrisburg said in its official filing. "Under the guarantees the city would need to cover a combined $83 million of past due payments and the 2011 debt service."
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Filing for Chapter 9 bankruptcy will cut state aid under a law passed in June. Councilwoman Susan Brown-Wilson, however, feels it would be better than attempting a state-imposed recovery plan.
"We're not incompetent," Brown-Wilson told Bloomberg News today. "We're just not going to let you run us over with the train anymore."
Controversy Over Bankruptcy Filing
While Harrisburg the city may be prepared to file for bankruptcy, many of the citizens of the Pennsylvania capital disagree.
Mayor Linda Thompson feels the Council lacks the legal authority to seek bankruptcy, and Dauphin County commissioners agree.
"This latest action by City Council is nothing more than a delay tactic to avoid making the tough decisions necessary to resolve the city's debt crisis," said commissioners Jeff Haste, Mike Pries and George P. Hartwick III in an e-mailed statement to Bloomberg.
Councilwoman Patty Kim, who voted against the move, fears bankruptcy will mire the city in unnecessary and unaffordable litigation.
"We still don't have money," Kim said, "and we still haven't moved one foot forward."
Pennsylvania Governor Thomas Corbett, a Republican, similarly opposes the bankruptcy filing, worried that it will affect the credit rating of Dauphin County and its neighbors.
