Harrisburg Bankruptcy Judge Tells Vendors City Can Pay Them

Nov. 1 (Bloomberg) -- Suppliers to Harrisburg, the bankrupt capital of Pennsylvania, can be paid through the city’s usual system without a special order from the court, a judge said.

U.S. Bankruptcy Judge Mary D. France agreed today to issue what she called a “comfort order” requested by Mayor Linda Thompson stating that federal bankruptcy law allows the city to pay its routine bills without the court’s special permission.

“There is no real need for the city to obtain this order,” France said in a hearing in Harrisburg. “This was really what we refer to as a comfort order.”

Thompson and state and county officials oppose the bankruptcy, which was filed after a vote of the city council earlier this month. Thompson’s lawyers are trying to get the bankruptcy thrown out while the council has its own lawyer defending the decision.

The judge set a hearing for Nov. 23 to decide whether to dismiss the case, as its opponents have requested.

The mayor asked for the pay authorization last week, saying some vendors worried about accepting payment without court approval of the city’s authority to settle its bills while in bankruptcy. The council opposed the request, claiming the motion was unnecessary and designed to give Thompson a “strategic” advantage in the case.

Harrisburg has a population of 49,500 and is the seat of Dauphin County. It faces a debt five times its general-fund budget because of an overhaul and expansion of an incinerator, which doesn’t generate enough revenue. Guaranteed debt is about $242 million, with $65 million of it overdue, according to the bankruptcy petition said.

The case is In re City of Harrisburg, Pennsylvania, 11-06938, 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.