Harrisburg Files 2nd Attempt to Restore Bankruptcy of Pennsylvania Capital

A lawyer for the Harrisburg, Pennsylvania, city council made a second attempt to appeal the dismissal of the city’s bankruptcy petition.

Mark Schwartz, attorney for the city council, filed court papers today seeking to overturn an earlier ruling by U.S. Bankruptcy Judge Mary D. France in Harrisburg, who refused to give the council extra time to file a notice of appeal, the first step in trying to reinstate the bankruptcy.

“I am convinced that her actions were arbitrary, in violation of the rules and due process,” Schwartz said in an e- mail.

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 convince France that the state ban violates Pennsylvania’s constitution.

France this month refused to allow Schwartz to appeal, saying he missed a deadline. Schwartz is appealing the refusal.

As it seeks to appeal, the city’s state-appointed receiver, David Unkovic, continues to work on a recovery plan due Feb. 6.

He wants to look into the privatizing the operations of the water and sewer systems, currently run by city employees, and he asked for proposals from bidders interested in buying the incinerator, said William J. Cluck, board member of the Harrisburg Authority, the agency that owns the systems and facility.

City’s Debt

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 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 city council has been fighting with Mayor Linda Thompson over how best to fix the city’s financial problems. Thompson opposed the bankruptcy and didn’t oppose the appointment of the receiver.

The case is In re City of Harrisburg, Pennsylvania, 1:11- bk-06938, U.S. Bankruptcy Court, Middle District of Pennsylvania (Harrisburg).

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

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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