Bloomberg News

Harrisburg Might Get a Receiver Thanks to Pennsylvania Bill

September 28, 2011

(Updates with lawmaker’s comment in fourth paragraph)

Sept. 28 (Bloomberg) -- Harrisburg may become Pennsylvania’s first municipality to fall under receivership.

The City Council in July and August rejected fiscal rescue blueprints from consultants hired by the state and Mayor Linda Thompson. Today, The state House of Representatives voted 185-9 for a bill that would let Republican Governor Tom Corbett name a receiver. The Senate still must consider the plan.

The capital city of 49,500 faces a debt burden five times its general-fund budget because of an overhaul and expansion of a trash-to-energy incinerator, which doesn’t generate enough revenue to cover the obligations. It avoided defaulting on general-obligation bonds in September and last year by getting advances on state aid.

The vote “sends a strong message” to elected officials in Harrisburg and elsewhere not to dawdle with recovery plans, Representative Glenn Grell said on the House floor.

Harrisburg would be the state’s first municipality in receivership, said Steven Kratz, a spokesman for the Department of Community and Economic Development.

Westfall Township in Pike County, which reorganized last year, was the state’s only local government in municipal bankruptcy. The two largest cities, Philadelphia and Pittsburgh, must have their budgets reviewed by appointed oversight boards whose powers are less extensive than a receiver’s.

Fiscal Emergency

Grell, of Hampden Township in Cumberland County, and Senator Jeffrey E. Piccola of Susquehanna Township in Dauphin County, both Republicans, are pushing the legislation. The bill would allow Corbett to declare a fiscal emergency in Harrisburg and name a receiver who would develop a recovery plan.

The manager, technically appointed by the Commonwealth Court and paid by the state, would have the power to implement the steps, such as selling assets, hiring advisers and suspending the authority of elected officials who interfere. Unlike in Michigan, the receiver wouldn’t be able to change union contracts.

“Both of us have the same goal in mind, to break the political stalemate and get the city of Harrisburg on the road to financial recovery,” said Grell in a statement. “The city, and for that matter the entire region, cannot afford to have more delay.”

The city will get another chance to devise its own plan. The bill, which also bars Harrisburg from filing for bankruptcy and from levying a tax on commuters, is headed to the Senate, which will take it up the week of Oct. 17, said Erik Arneson, a spokesman for Senate Republicans. Corbett has said he would sign a takeover bill.

Thompson in an e-mailed statement before the House vote blamed the four council members who rejected the state consultants’ recovery proposal, which called for selling and leasing assets and negotiating union contracts.

“Now we’re going to get approximately the same plan, but without the guaranteed funding and with little or no control over its implementation,” she said.

--Editors: Stephen Merelman, Stacie Servetah

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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