Bankruptcy Court Denies Harrisburg's Bankruptcy Again
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Bankruptcy Court Denies Harrisburg’s Bankruptcy Again

February 15, 2012


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The latest in the bankruptcy (or non-bankruptcy) saga of Pennsylvania’s capital city does not bode well for its debt load, reports Business Week. In early February, U.S. District Court judge Sylvia H. Rambo denied an appeal of Judge Mary D. France’s dismissal of Harrisburg’s bankruptcy filing.

To clarify: the City Council of Harrisburg voted to file for Chapter 9 bankruptcy protection in October, despite state laws that clearly stated Harrisburg was not eligible for bankruptcy protection. Harrisburg’s mayor and state officials challenged the bankruptcy petition in court, and on November 23, Judge France threw out the bankruptcy filing.

Because the City Council reportedly still believed that Harrisburg needed bankruptcy protection, however, its lawyer, Mark Schwartz, planned to file an appeal of France’s decision. He petitioned the court for more time in which to prepare the appeal but was denied that extra time. When he actually filed the appeal, it was dismissed without consideration, according to sources.

It seems that, partially because he missed the appellate deadline and partially because she considered his appeal to be potentially "frivolous," Judge Rambo dismissed Schwartz’s appeal without even reading it through.

Harrisburg to Handle Debt Outside Bankruptcy Court

The repeated bankruptcy dismissals indicate that Harrisburg will have to find a non-bankruptcy solution to its debt woes, but what that solution will be remains unclear at this point. With a population of only 49,500, Harrisburg reportedly now has debt that exceeds its general fund, thanks to the expansion and overhaul of an incinerator that has failed to bring in enough revenue to cover its cost to the city.

Of the city’s $242 million in guaranteed debt, $65 million is already overdue. It is the responsibility of the city’s receiver, David Unkovic, who was appointed by the state, to outline a plan for eliminating Harrisburg’s debt. He is scheduled to submit that plan for approval this week.

Harrisburg’s troubles, however serious, are by no means unique. Business Week reported this week that the mayor of Providence, Rhode Island, has noted that his city is likely to file for bankruptcy protection if it is unable to cut payments it makes in pensions and collect more taxes from tax-exempt organizations operating within city limits.

Though the mayor’s administration apparently cut the city’s deficit significantly, he has indicated that he expects Providence will be out of cash by the beginning of summer.

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