State legislators in Pennsylvania approved a bill that would prevent the City of Harrisburg from filing bankruptcy if they do not follow the advice of a state appointed task force setup to offer financial guidance to the city.
A state-appointed task force coordinator released a report earlier this month saying that Harrisburg should rein in personnel costs, sell or lease assets and outsource trash collection to avoid running out of money by the end of the year. City Council member Brad Koplinski said the report failed to address the city’s massive debt.
The Senate Community, Economic and Recreational Development Committee voted 9-5 to send the bill to the full Senate. The vote was along party lines, with the Republican majority supporting it and Democrats calling it an unwarranted encroachment on the authority of Harrisburg’s elected city leaders.
“They’re using bankruptcy as leverage to try to extract more money out of the bondholders, out of regional (and) state taxpayers,” Piccola said. “We don’t want the city to go into bankruptcy, because that’s a disaster not just for the city itself, but the commonwealth and virtually every municipality in the commonwealth because it affects our bond ratings.”
But is the bankruptcy filing simply a ploy to squeeze money out of bondholders and citizens? Or, is the bankruptcy an attempt to handle the city’s debt in a comprehensive and sustainable manner. Right now the City of Harrisburg pays some of the largest trash collection fees in the country because the recently overhauled incinerator is costing the city a fortune. Loans taken out to build the incinerator and the failure of the incinerator to become the cash cow the city had hoped for, has conspired to render the city deeply indebted.
By the state officials forcing their decisions onto the city and attempting to stop the bankruptcy filing, they are setting an undesirable precedent for other states that says it’s okay to interfere and stop a city from filing bankruptcy. It also gives the false impression that bankruptcy is some horrid action when in fact it may be just what the city needs to survive.
(source: BusinessWeek.com )