While Pennsylvania lawmakers are crafting a state takeover of Harrisburg, officials in the financially strapped capital aren’t giving up control without a fight.

The City Council has hired Philadelphia-area attorney Mark Schwartz, a former bond lawyer and investment banker, in its battle against the takeover.

Schwartz said he would work free for now, but bill the council in the future.

“These are serious and unprecedented initiatives,” Schwartz wrote in a letter to Gov. Tom Corbett’s general counsel, Stephen Aichele.

Meanwhile, the House on Wednesday approved by a 185-to-9 vote an amended bill that would let Corbett declare a state of fiscal emergency and place the capital city under receivership.

The bill, filed by Sen. Jeffrey Piccola, R-Susquehanna Valley, and amended by Rep. Glen Grell, R-Hampden Township, will go back to the Senate for concurrence when the General Assembly returns to session on Oct. 17.

It amends the Municipal Financial Recovery Act of 1987 — commonly known as Act 47, as is the program for distressed communities that it created — to allow the state to intervene when a third-tier city rejects the plan.

Pennsylvania categorizes municipalities by population tiers.

Harrisburg is the first community in Act 47 to have rejected a financial recovery plan. It has done so three times — all by 4-to-3 votes, most recently on Sept. 13.

“Harrisburg’s rejection revealed a flaw in the Act 47 bill. There were no 'what

ifs,’ ” Grell said in a telephone interview. “This fix applies not only for Harrisburg, but for others in Act 47.”

Piccola filed the original bill last June in the Senate, when it was tabled.

The latest version prohibits a commuter tax. Grell and Piccola represent many suburban commuters who work in Harrisburg.

Schwartz’s high-profile cases included representing a Spokane, Wash., citizens group in 1998 that fought the city’s involvement in a $31.5 million public-private partnership deal. The Internal Revenue Service eventually ruled that the bonds would be taxable.

Schwartz called the state’s moves against Harrisburg “a big reach into the real unknown.”

“This rush to put Harrisburg into a straitjacket does not add one cent to the situation,” he added.

Grell, though, said the legislation does not impose a plan on the city. “It imposes a process,” he said.

Harrisburg owes about $310 million of bonds outstanding on its incinerator, and to Dauphin County, bond insurer Assured Guaranty Municipal Corp., and the facility’s operator, the Harrisburg Authority.

All three parties have lawsuits pending against the city.

Mayor Linda Thompson has asked the council to vote again on the Act 47 plan, which she has favored from the outset. But to succeed in a fourth try, she must win over one of four people who have voted against the proposal throughout.

After the third rejection, Thompson repeatedly called the four holdouts “unfit for public office.” They are Brad Koplinski, Susan Brown-Wilson, Wanda Williams and Eugenia Smith.

Thompson’s comments upset one Act 47 supporter on the council, Patty Kim.

“It’s Politics 101,” she said. “You don’t publicly criticize people you have to work with. That’s it.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.