Harrisburg City Council Loses Second Attempt to Return City to Bankruptcy

The city council of Harrisburg (9661MF) lost a second attempt to return the capital city of Pennsylvania to bankruptcy.

U.S. District Court Judge Sylvia H. Rambo in Harrisburg threw out an appeal filed by City Council attorney Mark Schwartz, ruling that the council missed a deadline to challenge a lower court ruling that dismissed the bankruptcy last year.

U.S. Bankruptcy Judge Mary D. France dismissed the bankruptcy on Nov. 23 and later refused to let Schwartz appeal, ruling that he waited too long. Schwartz then asked Rambo to give him more time.

Rambo refused, calling the effort “potentially frivolous.”

“Appellant City Council has not acted in good faith,” Rambo wrote in her opinion issued yesterday.

In an e-mail, Schwartz said he followed the process for getting extra time to file an appeal and that both judges ruled without holding a hearing to gather any facts.

“Another door should not have been slammed on Harrisburg,” Schwartz said in the e-mail today.

The council put the city 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.

Receiver Appointed

Harrisburg, a city of 49,500, faces debt greater than its general fund, in part 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 a receiver to run the city. That receiver, David Unkovic, chief lawyer for the state economic development department, has until Feb. 6 to file a recovery plan for the city.

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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