Pennsylvania Gov. Tom Corbett on Thursday signed legislation authorizing the state to declare a fiscal emergency in Harrisburg and appoint a receiver to implement a recovery plan.
Right away, the attorney for Harrisburg’s City Council — which last week filed a Chapter 9 bankruptcy petition that the mayor, council, state and bondholders oppose — said he would contest any state takeover in bankruptcy court.
“Forget unconstitutional, it is just plain perverse,” said Mark Schwartz. “The governor is putting himself in an untenable and conflicting situation as the executive of the state and also standing in the shoes of a municipality.”
After signing the bill, which both chambers of Pennsylvania’s General Assembly passed overwhelmingly the two previous days, Corbett said the bill would strengthen Act 47, the law that covers distressed municipalities in which Harrisburg enrolled last September.
“If there is a failure to act, the state will intervene,” the Republican Corbett said in a statement. “The state has to take action to insure public safety.”
“We will comply with that law,” said Mayor Linda Thompson, who planned a press conference for later Thursday.
Assured Guaranty Municipal Corp. and Dauphin County are the guarantors of $310 million of bond debt related to a costly incinerator retrofit, coordinated through the Harrisburg Authority. According to bankruptcy documents, the city guaranteed about $242 million of debt related to the incinerator, and $65 million is overdue.
The City Council three times rejected a financial recovery program under Act 47. Although the bill Corbett signed on Thursday refers to all distressed third-class cities — Harrisburg’s status under the state’s population tiers — the legislation was clearly aimed at Harrisburg. Its sponsors, Sen. Jeffrey Piccola and Rep. Glen Grell, represent Dauphin County.
Under the law, which bans a commuter tax on non-residents, Harrisburg has 30 days, or until Nov. 19, to devise a recovery plan acceptable to the Department of Community and Economic Development, whose secretary will have the power to develop a plan to ensure public safety.
Thompson said Thursday that she would use her proposed plan as the starting point for any discussion of consent agreements.
A receiver, if appointed, would implement any plan and control the city’s finances. A four-member advisory panel, would include the mayor and City Council president and appointees from the governor and the county.
The end of the 30-day period brushes up against the Nov. 23 hearing that Judge Mary France has scheduled in the U.S. Bankruptcy Court for the Middle District of Pennsylvania in Harrisburg. France that day is scheduled to rule on the validity of the City Council’s bankruptcy filing, and possibly on the takeover law.
“She’s made it clear that all roads lead through her,” said Schwartz. “Hopefully the bankruptcy court jurisdiction makes the signed legislation dead on arrival.”
