Harrisburg, Pa., Mayor Linda Thompson has requested that the judge overseeing the City Council’s bankruptcy filing authorize expenses to vendors.
Mary France, of the U.S. Bankruptcy Court for the Middle District of Pennsylvania in Harrisburg, will act on the motion Tuesday.
Some vendors worry about doing business with Pennsylvania’s capital city on other than a cash-on-delivery or an up-front basis and are concerned that receiving payments from it without court approval could leave them on the hook legally, Thompson said in a filing by law firm Tucker Arensberg PC.
“The city does not need court authority to pay vendors for their pre-petition claims, but the city has been put in the position of needing to file this motion,” Thompson said.
Harrisburg has about $310 million of bond debt, including $245 million for an incinerator retrofit project. According to bankruptcy papers, the city has skipped about $65 million in payments.
Thompson reiterated her objection to the council’s Oct. 11 filing, which she considers illegal. The state and Dauphin County have also opposed the filing. Others filing objections on Friday included incinerator bond insurer Assured Guaranty Municipal Corp., and Ambac Assurance Corp., the insurer for the city’s general obligation bonds.
Harrisburg has about $60 million of GO debt, but is current on the payments after working out a 10-year, $7.4 million lease extension last month with the Harrisburg Parking Authority.
France is expected to rule on the validity of the filing on Nov. 23. The council voted to file for bankruptcy after three times rejecting a financial recovery plan under the state’s Act 47 program for distressed communities.
Meanwhile, Controller Dan Miller said that the city could be on the hook in five years for another $95 million in two series of capital appreciation bonds.
“It’s an example of another shoe that’s going to drop, another part of the whole picture,” he said in an interview Friday of the bonds that the Harrisburg Redevelopment Authority issued in the mid-1990s and has not paid, but which the city has guaranteed. The first payment is due in 2016 and the city will have to pay $7 million a year.
Miller repeated his call that bankruptcy is the only option. “The Act 47 plan merely pays off bondholders,” he said.
