Chapter 9 Update: PA Governor Signs Law to Take Over City's Financial Decisions

Though a hearing on the Thompson and Pennsylvania government's opposition to Harrisburg's Chapter 9 bankruptcy filing is tentatively scheduled for Nov. 23, the governor may have thrown a wrench into the entire matter already by signing a new law that paves the way for the state to declare a fiscal emergency and take over the financial decisions of the city.

Governor Tom Corbett signed Senate Bill 1151 that decries whenever a third-class Pennsylvania city (a category into which Harrisburg fits) fails to implement a fiscal recovery plan when facing insolvency, the governor will be given power to declare fiscal emergency once a city becomes insolvent or is projected to within 180 days. Also, the city in question, in this case Harrisburg, will have 30 days to develop and adopt an acceptable fiscal recovery plan to avert a state takeover of financial decision-making. Without one, which is unlikely in Harrisburg, the takeover would begin immediately after the designated 30-day period.  This all could very well affect the recent bankruptcy filing, though the extent remains somewhat unknown.

“I remain a strong proponent for municipal governments tackling their own problems and coming together to develop a fiscal recovery plan when necessary,” said Corbett. “But when that fails to happen, the state has to take action to ensure public safety…the state will intervene.”

As noted on NACM's blog and eNews this week, Harrisburg’s city council defied the wishes of the state and its own mayor by voting 4-3 to file for Chapter 9 bankruptcy. Supporters of doing so believe it gives the city leverage to renegotiate debt largely tied to a massively unsuccessful trash incinerator project, and provides more of a fair option to local taxpayers that didn’t want to take a hit out of proportion to that of investors.

Brian Shappell, NACM staff writer


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