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Oct. 12 (Bloomberg) -- Harrisburg, Pennsylvania, which faces a state takeover of its finances, filed for bankruptcy protection after failing to pay the debt on a trash-to-energy incinerator.
The City Council made its 4-3 decision yesterday against the advice of a city attorney who said members did not follow proper procedure. It’s this year’s ninth bankruptcy filing by a municipal-bond issuer and the first by a U.S. state capital in at least three decades, said James Spiotto, a partner at Chapman & Cutler in Chicago who tracks such cases.
“This was a last resort,” said Mark D. Schwartz, the council’s Bryn Mawr, Pennsylvania-based lawyer. “They’re at their wits’ end.”
Harrisburg is the biggest city to file for bankruptcy since Vallejo, California, in 2008, according to a ranking by Municipal Market Advisors, a Concord, Massachusetts, research firm. U.S. municipalities have been battered by the financial crisis. Harrisburg’s filing came less than a month after Alabama’s Jefferson County Commission voted to try to avert what would have been the nation’s biggest municipal bankruptcy, and nine months after Vallejo emerged.
The petition lists among the creditors insurer Ambac Financial Group Inc., due more than $70 million, and Covanta Holding Corp., with about $120 million of bonds and advances of funds to Harrisburg. The petition listed both assets and debt of between $100 million and $500 million.
‘Generally Not Paying’
The city of 49,500, which is the seat of Dauphin County, faces a debt five times its general-fund budget because of an overhaul and expansion of the incinerator, which doesn’t generate enough revenue. Its guaranteed debt is about $242 million, with $65 million of it overdue, according to the petition.
Harrisburg “has repeatedly failed to pay,” the filing said. “The city would need to cover a combined $83 million of past due payments and the 2011 debt service.
While Chapter 9 bankruptcy, named for the section of federal law that governs insolvent municipalities, would mean the loss of state aid under a law passed in June, it would be better than the pain of a state-imposed recovery plan, said Councilwoman Susan Brown-Wilson.
“We’re just not going to let you run us over with the train anymore,” Brown-Wilson said.
Read more Harrisburg Files for Bankruptcy on Overdue Incinerator Debt - Businessweek
Note the State Capital is in Harrisburg
The City Council made its 4-3 decision yesterday against the advice of a city attorney who said members did not follow proper procedure. It’s this year’s ninth bankruptcy filing by a municipal-bond issuer and the first by a U.S. state capital in at least three decades, said James Spiotto, a partner at Chapman & Cutler in Chicago who tracks such cases.
“This was a last resort,” said Mark D. Schwartz, the council’s Bryn Mawr, Pennsylvania-based lawyer. “They’re at their wits’ end.”
Harrisburg is the biggest city to file for bankruptcy since Vallejo, California, in 2008, according to a ranking by Municipal Market Advisors, a Concord, Massachusetts, research firm. U.S. municipalities have been battered by the financial crisis. Harrisburg’s filing came less than a month after Alabama’s Jefferson County Commission voted to try to avert what would have been the nation’s biggest municipal bankruptcy, and nine months after Vallejo emerged.
The petition lists among the creditors insurer Ambac Financial Group Inc., due more than $70 million, and Covanta Holding Corp., with about $120 million of bonds and advances of funds to Harrisburg. The petition listed both assets and debt of between $100 million and $500 million.
‘Generally Not Paying’
The city of 49,500, which is the seat of Dauphin County, faces a debt five times its general-fund budget because of an overhaul and expansion of the incinerator, which doesn’t generate enough revenue. Its guaranteed debt is about $242 million, with $65 million of it overdue, according to the petition.
Harrisburg “has repeatedly failed to pay,” the filing said. “The city would need to cover a combined $83 million of past due payments and the 2011 debt service.
While Chapter 9 bankruptcy, named for the section of federal law that governs insolvent municipalities, would mean the loss of state aid under a law passed in June, it would be better than the pain of a state-imposed recovery plan, said Councilwoman Susan Brown-Wilson.
“We’re just not going to let you run us over with the train anymore,” Brown-Wilson said.
Read more Harrisburg Files for Bankruptcy on Overdue Incinerator Debt - Businessweek
Note the State Capital is in Harrisburg
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