Just one day after California passed a law designed to slow the pace of cities declaring bankruptcy there (see Tuesday's blog posting), another state’s previous effort to prevent a Chapter 9 filing by its capital city failed on a narrow city council vote Tuesday.
In what has been building for months, Harrisburg, PA’s city council defied the wishes of the state and its own mayor by voting 4-3 to file for Chapter 9 bankruptcy. Reports indicated a bankruptcy petition was faxed to U.S. District Court soon after. 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 not proportional to that of investors.
Bruce Nathan, Esq., of Lowenstein Sandler PC, who is presenting an NACM teleconference on the topic today at 3 pm (EST) noted the municipal bankruptcy issue has potential to grow significantly in the coming months on struggles to pay for things such as skyrocketing health care and pension obligations as well as lower revenue and construction-related debts tied to the ongoing economic downturn.
For more information on today's teleconference, including how it will affect credit managers, or to register,
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Brian Shappell, NACM staff writer