City of Harrisburg, PA Goes Bankrupt
Seeking to stave off a state takeover of its beleaguered budget, the city of Harrisburg, Pennsylvania authorized filing for Chapter 9 bankruptcy protection late Tuesday.
Harrisburg, the Pennsylvania capital that previously defaulted on its debt, cited a “continued erosion of its finances,” in the resolution approving the filing.
According to Bloomberg News, Pennsylvania lawyer Mark Schwartz filed bankruptcy documents by fax late Tuesday in federal bankruptcy court. Schwartz didn’t immediately respond to a request for comment.
The resolution passed by a narrow 4-3 vote Tuesday night, Kirk Petroski, the acting city clerk of Harrisburg, told FOX Business. The resolution said the filing will provide the city with “the necessary protection from its creditors while it develops and negotiates a plan for adjusting its debts.”
However, acting city attorney Jason Hess said the measure wouldn’t be binding because the city council didn’t follow procedure, Bloomberg reported.
Harrisburg listed liabilities of $500 million, compared with assets of $100 million, Bloomberg reported.
The fiscal troubles have been triggered by an overhaul of the budget and a trash-to-energy incinerator that didn’t increase revenue by as much as expected, Bloomberg reported.
The move comes as the state had been mulling a takeover of the city’s finances and forcing the installation of a fiscal rescue plan.
Some council members who voted against the bill expressed concern about whether or not the city can afford the costly legal bills it could entail.
In a letter to the council, Schwartz said he generally charges $525 an hour, but will reduce his rate to $300 an hour for this matter. However, he said he is requiring a $20,000 retainer for fees and expenses.