Bloomberg News

Harrisburg Council Files Appeal to Reinstate City Bankruptcy

December 13, 2011

(Updates with comment from council attorney in third paragraph.)

Dec. 11 (Bloomberg) -- Harrisburg city council members, battling the state and the mayor over the insolvent city’s finances, told a federal judge they’re appealing her decision throwing out their bankruptcy petition.

Mark Schwartz, the attorney for the council, yesterday filed a notice to U.S. Bankruptcy Judge Mary D. France that the council will seek to overturn her Nov. 23 ruling dismissing the case. France found that the council didn’t have authority to bring the Chapter 9 petition and that the filing violated Pennsylvania law.

“I feel that the decision was in error,” Schwartz said in an e-mail yesterday. “Moreover, this is a case that could very well end up in the U.S. Supreme Court.”

The council put the capital city of Pennsylvania into bankruptcy in October, disregarding a state law that banned such a filing. Under Chapter 9 of the federal bankruptcy code, state authorization is necessary, so France threw out the case. Schwartz and the council had tried to persuade France that the state ban violated Pennsylvania’s constitution.

Harrisburg, a city of 49,500, faces a debt five times its general-fund budget because of an overhaul and expansion of an incinerator that doesn’t generate enough revenue. Guaranteed debt is about $242 million, with $65 million overdue, according to the bankruptcy petition.

On Dec. 1, a state judge confirmed the appointment of David Unkovic, chief lawyer for the state economic development department, as a receiver to run the city. Unkovic has the power to overrule the city council and Harrisburg’s mayor.

The case is In re City of Harrisburg, Pennsylvania, 11-06938, U.S. Bankruptcy Court, Middle District of Pennsylvania (Harrisburg).

--With assistance from Romy Varghese in Philadelphia. Editor: Fred Strasser, Sylvia Wier

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net

To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net


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