Harrisburg mayor "confident the city will prevail" despite bankruptcy

By Devika Patel

Knoxville, Tenn., Oct. 17 -Harrisburg mayor Linda D. Thompson said today that the filing for bankruptcy by will have no affect on the conduct of city business including relationships with all vendors and creditors. Four city council members decided to hire outside counsel and file bankruptcy on Oct. 11. The mayor had previously said that this filing violated city ordinances and is invalid.

"Chief Judge Mary D. France has made it very clear that the focus of the proceedings at this point is the legality of the filing by council without the authority of the mayor and solicitor, as well as the hiring of an attorney to speak for the City in violation of City Law," Mayor Thompson said Monday.

The mayor also said that the city special counsel would file the formal objection to the bankruptcy by Oct. 28.

"I'm confident the city will prevail in both matters, and as the legal process unwinds in the court," the mayor said in a press release. "It is business as usual in the city."

"I oppose the so-called 'take over' legislation, but I will continue to argue for a stronger role for the citizens of Harrisburg through the mayor and council president's greater involvement in the receivership process," Thompson said in the release.

After a 4-3 vote on Oct. 11, the council hired attorney Mark D. Schwartz. On Oct. 12, Schwartz filed a Chapter 9 bankruptcy petition on behalf of Harrisburg in the U.S. Bankruptcy Court for the Middle District of Pennsylvania.

The mayor has said that no payment schedules would be affected and that the city is on budget through the end of the year.

As previously reported, the city's financial woes include six legal actions related to $242 million of outstanding bonds guaranteed by the city for construction of an incinerator.

Incinerator owner Harrisburg Authority is unable to pay the bond issues. Payment on the bonds is $65 million past due, according to court documents.

Under the guaranties, the city said, it would be required to pay a combined $83 million of past-due payments and 2011 debt service.

The city suffered a $5.35 million budget deficit in 2010 and is projected to a have a $3 million deficit this year, without paying any guaranteed bond obligations.

Chapter 9 is specifically tailored for reorganization of municipalities, as well as counties, taxing districts, municipal utilities, and school districts, according to the federal court system website. The provision was used by Orange County, Calif., in 1994.

Harrisburg's Chapter 9 case number is 11-06938.

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