Bloomberg News

Pennsylvania Gives Governor Power Over Harrisburg’s Finances

October 19, 2011

(Updates with details of vote in third paragraph.)

Oct. 19 (Bloomberg) -- Harrisburg might become Pennsylvania’s first city in receivership after lawmakers sent Governor Tom Corbett a bill empowering him to name a manager who will be able to overrule elected officials and run municipal finances.

In a 177-18 vote, the state House of Representatives today gave final approval to a bill that would let Corbett declare a fiscal emergency in advance of a state takeover. Corbett, a Republican, has said he will sign it.

Members didn’t debate the bill. Democratic Representative Ron Buxton, whose district includes the city, requested an affirmative vote before the roll call.

On Nov. 23, a federal judge will consider the validity of a bankruptcy petition filed by the Harrisburg City Council. The council approved the move 4-3 as a bid to ward off state action after skipping payments on debt tied to a trash-to-energy incinerator project. The state and Mayor Linda Thompson, a Democrat, have challenged the filing.

A receiver can’t end the bankruptcy without court approval, according to Mark D. Schwartz, an attorney for the council, and lawyers for the mayor.

“It’s a power grab,” said Councilwoman Susan Brown- Wilson, who signed the bankruptcy filing, in a phone call after the House vote. ‘We’ll want to see where the bankruptcy comes out.’’

Corbett told reporters yesterday that he has “in mind some people I want to interview” for the receiver position.

Governor in Charge

The city of 49,500 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 to cover the obligations. Harrisburg guaranteed about $242 million of debt related to the incinerator, with $65 million of it overdue, according to the bankruptcy filing.

The legislation would give Corbett control over the city’s elected officials and let him name a receiver who would develop a recovery plan.

The manager would have the power to sell assets, hire advisers and suspend the authority of elected officials who interfere. The receiver wouldn’t be able to change labor contracts without unions’ agreement.

A House analysis estimated the cost of receivership to be as much as $2.55 million in the first year, with the city bearing 60 percent of it.

Talk It Through

“The preferable course of action would be for the city of Harrisburg through its elected officials on City Council and the mayor to work out an appropriate and acceptable pathway to fiscal solvency,” Senator Jeffrey E. Piccola, a Dauphin County Republican who helped draft the legislation, said after the Senate vote yesterday.

After Corbett signs the bill, he may declare a fiscal emergency. The city would have 30 days to devise a fiscal blueprint approved by the state before a receiver is named. The council in July and August rejected roadmaps for recovery.

Senator John P. Blake, a Democrat, said the bill disregarded democratic principles.

“This legislation is meant to protect moneyed interests at the expense of local taxpayers under the guise of protecting public safety,” he told his colleagues yesterday. “I think it’s an overreach of state government powers.

Thompson has said that while she opposes losing fiscal control, she will lobby for greater powers for herself if a receiver is named. The bill names the mayor as an adviser to the receiver on any recovery initiative.

--With assistance from Steven Church in Wilmington. Editors: Stephen Merelman, Mark Schoifet

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

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


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus