Harrisburg back to square one

November 28, 2011

Federal bankruptcy judge Mary France dismissed the Harrisburg City Council’s petition to file municipal bankruptcy last Thursday. According to Bloomberg her ruling stated:

“For Chapter 9 bankruptcy to work, all of the branches of the municipality must be on the same page,” France said. “Therefore I find that city council was not authorized to file the petition.”

Judge France has hit the nail on the head. The legislative and executive branches of Harrisburg’s government have been behaving like two sides of a family fighting over a deceased parent’s estate. The battle has been brutal and family members have talked past each other. Harrisburg mayor Linda Thompson seems to have little patience for others’ views, which is a tough way to govern.

So Harrisburg is cast into the arms of the soon-to-be-confirmed state receiver, who will have to return the city to fiscal solvency. But Harrisburg’s debts are just too high to pay off, and the incoming receiver has no authority to force bondholders and bond guarantors to take less than the face value of their paper. On Twitter Jim Warner, the CEO of the Lancaster County Solid Waste Management Authority, suggested that the leftover debt after the sale of the city’s main assets — its incinerator and parking garages —  would be about $55 million.

But this doesn’t take into account the other debt of the city. My rough calculations show the city will have a debt load of about $224 million.  And although it’s not consolidated, the city is also responsible for over $200 million of school debt.

This small city of 50,000 — where over 25 percent of residents live under the poverty line — is responsible for shouldering $425 million in debt. The new Harrisburg receiver needs to be Superman to bring this city back to fiscal solvency.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/