The PA Legislature Extended the Chapter 9 Prohibition (on the City of Harrisburg)

The bankrupt City of Harrisburg just lost its tool of bankruptcy for another five months.

A year ago, the PA Legislature passed a law prohibiting 3rd Class cities in the State from filing Chapter 9 Municipal Bankruptcy protection. Slipped into the Fiscal Code at the very last minute, the law was aimed at stopping the fiscally dire capital city of Harrisburg from doing what it was telling uncooperative creditors it would do if fair concessions didn’t take place—file bankruptcy. In bankruptcy court those very creditors unwilling to budge would be at risk of being made to budge, and that’s just not something they were willing to do.

The law was passed and for one year until June 30, 2012, Harrisburg (and all other 3rd Class cities) were not allowed to go bankrupt.

Fast forward to a year later. With a mere 24 hours left on the moratorium, a law is presented, passed, passed along and passed again until it was incorporated into the 2012-2013 Budget packet the Governor signed. It extends the municipal bankruptcy moratorium for five more months.

Why five more months? It seems like an arbitrary time frame. Five more months takes us to November. What’s the significance of that?

Arbitrary it very likely isn’t. There seems to be a definite plan and it’s been that way all along, but it isn’t a plan for public perusal. It’s a plan contingent on taxpayers, but they are the last ones being asked for input.

In the past few weeks, the Mayor of Harrisburg along with the City’s newest Receiver, William Lynch, have joined the City Council in declaring that the City must be allowed the tool of bankruptcy. Lynch stated, “I’m not in favor of any kind of prohibition on bankruptcy because it limits my abilities and the tools I have in my kit.”

Yet in what is said to be a Senator Jeff Piccola push, the PA Legislature did just what the man in charge of the recovery of Harrisburg requested not happen. It extended the prohibition.

And with that move, the disadvantaged City of Harrisburg—a city with 50% property tax exempt (75% of that which is government owned), a city with 37% of its citizens living below poverty, a city that is on the line for more than $330 million—lost its most powerful tool.

 

 

See Roxbury News videos:

• Rep. Ron Buxton___A certain individual
• Representative Glen Grell on PA’s Chapter 9 Municipal Bankruptcy Law: “I believe it probably does make sense to extend the moratorium.”
• Governor Corbett on the City of Harrisburg: “The City Council has been doing nothing.”

Read: “Will the Chapter 9 Municipal Bankruptcy Prohibition Be Extended?”