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Pennsylvania's Rendell Working to Avoid Bankruptcy Filing by Harrisburg

Pennsylvania Governor Ed Rendell said he opposes a bankruptcy filing by the state’s capital city, Harrisburg, which has told bondholders it cannot make $3.3 million in general-obligation bond payments due Sept. 15.

Rendell, 66, a Democrat whose term ends in January, said his administration is working with the city to pay for a financial adviser. Pennsylvania, the sixth most-populous U.S. state, has no authority to make the debt-service payment, which is scheduled to be covered by its insurer, Ambac Financial Group, on Harrisburg’s behalf, Rendell said in an interview with Margaret Brennan on Bloomberg Television’s “InBusiness.”

“They have a chance to dig themselves out of this without going into bankruptcy, and that’s something I’d like to see,” he said today. “Harrisburg has some assets they can sell.”

Harrisburg Mayor Linda Thompson, who took office in January, yesterday proposed closing one of the city’s four firehouses, furloughing senior staff members, raising parking fees and negotiating pay cuts with public employee unions to address a deficit in this year’s $118 million city budget. Tax revenue is coming in about $9 million below projections, a June 30 report from Thompson shows.

City Council members balked at tax increases and the sale of parking garages and other assets that Thompson proposed in January. Bankruptcy is a “real option” for the city of 47,000, Council Vice President Patty Kim said Sept. 1, after the city notified the trustee of its 1997 D and 1997 F zero-coupon bonds that it wouldn’t make the Sept. 15 payments.

The city also has skipped $8 million in payments it guaranteed this year on bonds issued by the Harrisburg Authority for a trash-to-energy incinerator built in the 1960s. Rendell said the debt the city faces from that project makes Harrisburg’s situation “an aberration.”

To contact the reporter on this story: Dunstan McNichol in Trenton, New Jersey, at

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