A judge on Monday placed the Chapter 9 bankruptcy filing by Harrisburg’s City Council on hold for a month, while a few blocks away in Pennsylvania’s capital, lawmakers continued their push for a state takeover of the struggling city.
Mary France of the U.S. Bankruptcy Court for the Middle District of Pennsylvania in Harrisburg set a Nov. 23 hearing on the legality of the council’s bankruptcy petition; lawyers for Mayor Linda Thompson, Dauphin County and the state appeared in court to oppose the petition.
“I like this judge. She’s going to be deliberate and give this matter the time it deserves,” Mark Schwartz, the Bryn Mawr, Pa., attorney representing the City Council, said after the hearing.
According to France, the month will allow parties in the case, including bond insurer Assured Guaranty Municipal Corp. and general obligation bond insurer Ambac Financial Group Inc., time to file briefs and replies, and possibly to negotiate.
Last Wednesday, the council voted 4 to 3 to file for bankruptcy. Three times over the summer — all by 4 to 3 votes — it rejected a financial recovery plan under the state’s Act 47 program for distressed communities.
The city has about $310 million in outstanding bond debt due to cost overruns from an incinerator retrofit project gone bad.
“Even if denied Chapter 9 bankruptcy protection, Harrisburg’s filing is credit negative because it will likely delay execution of a recovery plan to address the city’s significant financial distress,” Moody’s Investors Service said in a report issued Monday.
In court on Monday, Kenneth Lee of Tucker Arensberg PC and Neal Colton of Cozen O’Connor, representing Thompson and the state, respectively, contested the legality of the City Council’s Chapter 9 petition.
“The city believes that this case was not properly filed and must be dismissed,” Lee said, according to court documents. He cited powers vested to the city’s chief executive through the Plan A, or strong-mayor form of government.
“Only the mayor can authorize legal action on behalf of the city and only the city solicitor can initiate that action,” Lee said.
Acting solicitor Jason Hess has also questioned the legality of the filing.
Colton cited a law the Pennsylvania General Assembly passed in June that prohibits a financially distressed third-class city — a category of municipalities that includes Harrisburg — from filing for bankruptcy under the threat of losing all state aid.
Meanwhile, the state Senate is poised to vote Tuesday on a bill that would enable Republican Gov. Tom Corbett to declare a state of fiscal emergency. On Monday, the Senate’s rules committee approved the bill 11 to 6.
According to Colleen Greer, a spokeswoman for state Sen. Jeffrey Piccola, R-Susquehanna Valley, who is one of the bill’s co-sponsors, the full House could hold a concurrence vote as soon as Tuesday.
Corbett has said he would sign the legislation.
Thompson, whose role as mayor would be reduced under receivership, said she would continue to lobby for expanded powers of the advisory committee on which she and council President Gloria Martin-Roberts would serve.
