Pennsylvania Governor Declares Fiscal Emergency in Capital
Pennsylvania Governor Declares Fiscal Emergency in Capital
Paul Taggart/Bloomberg
Empty chairs sit at Harrisburg City Council chambers in Harrisburg, Pennsylvania.
Empty chairs sit at Harrisburg City Council chambers in Harrisburg, Pennsylvania. Photographer: Paul Taggart/Bloomberg
Oct. 19 (Bloomberg) -- Linda Thompson, mayor of Harrisburg, Pennsylvania, talks about the city's governance and financial condition. 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. (Source: Bloomberg)
Pennsylvania Governor Tom Corbett declared an emergency in Harrisburg that allows him to assume financial control and name the state’s first municipal receiver.
Empowered by legislation he signed Oct. 20, Corbett today said the capital city’s fiscal distress warranted such action.
The City Council’s “failure to enact a recovery plan in order to deal with the city’s distressed finances has led me to declare a fiscal emergency,” the Republican governor said in a news release. “This action ensures that vital services will continue and public safety will be protected.”
Corbett can now direct city and state officials to comply with his plan to ensure debt obligations and payroll are met. A receiver can be named in 30 days if they fail to devise a recovery plan acceptable to the state.
Corbett acted after Harrisburg became the first U.S. state capital in at least 40 years to file for bankruptcy and his move may signal more willingness by states to take control of local financial problems. In March, Michigan gave emergency managers expanded powers such as nullifying union contracts.
A Harrisburg receiver would require approval from bankruptcy court, according to both Mark D. Schwartz, an attorney for the City Council, and lawyers for Mayor Linda Thompson.
Skipping Payments
The council on Oct. 11 approved a bankruptcy filing 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 Thompson have challenged the filing, whose validity will be considered at a Nov. 23 hearing before a federal judge.
The city of 49,500 faces debt 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 council had rejected proposals by state consultants and Thompson that would have sold assets to repay creditors and raised property taxes on residents, 29 percent of whom live in poverty.
Thompson said in a statement today that she will soon schedule a public meeting to work on a plan to avert a takeover.
“This is council’s last change to get to the table and be part of the process or get out of the way when the state receiver steps in,” Thompson said. “If we don’t attempt to solve our own fiscal problems, the alternatives will be far worse.”
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
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