Harrisburg, Pennsylvania, Receivership Oversight Ended

Harrisburg, the once-insolvent capital of Pennsylvania, won an end to court oversight of its receivership after implementing a debt-restructuring settlement with creditors owed $362.5 million.

Commonwealth Court Judge Bonnie Leadbetter in Harrisburg agreed to dismiss the case on March 1, about six months after she approved a recovery plan negotiated with creditors that ended a fiscal emergency in the city of 50,000. Leadbetter will retain authority to enforce the recovery plan, should that be necessary, according to an order she entered yesterday.

The crisis stemmed from an overhaul and expansion of a waste-to-energy incinerator, which didn’t generate enough revenue. Harrisburg in December reduced its debt burden, which had run to about seven times its general-fund budget, through the sale of the incinerator, lease of a parking system and concessions from creditors.

In 2011, the city council defied the mayor and state officials by placing Harrisburg, which has a poverty rate more than twice the statewide average, under federal bankruptcy protection. The case was thrown out after the bankruptcy judge concluded the council didn’t have the necessary authority from the state to file.

Governor Tom Corbett, a Republican, then appointed bond attorney David Unkovic as receiver. Unkovic later resigned and was replaced by William B. Lynch. State law gave Lynch the authority to negotiate a settlement, not impose taxes or take other actions needed to implement a deal. And while the law allowed Leadbetter to help the city negotiate, she lacked authority to impose cuts on unwilling creditors.

The case is Walker v. Harrisburg Authority, 569-MD-2011, Pennsylvania Commonwealth Court, 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: Andrew Dunn at adunn8@bloomberg.net

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