Governor Moves To Take Fiscal Control Of Pennsylvania’s Capital

Sabrina Tavernise
New York Times

The fate of Pennsylvania’s financially troubled capital city, Harrisburg, took another twist in a long road on Thursday when Gov. Tom Corbett signed a bill permitting him to place the city into receivership.

By signing Senate Bill 1151 into law, Mr. Corbett may now declare a fiscal emergency in Harrisburg.

The governor is aiming to wrest control of the city’s finances away from the mayor and the City Council, which have been at loggerheads for months. The Council has repeatedly rejected efforts by Mayor Linda D. Thompson to impose a financial recovery plan, and last week, it filed a Chapter 9 petition in federal bankruptcy court, a move that Ms. Thompson and Mr. Corbett immediately declared illegal.

Kelli Roberts, a spokeswoman for the governor, said Mr. Corbett planned to file a petition in state court to place the city into receivership, but would probably not do so this week.

The city’s troubles stem from a failed trash incinerator project that has saddled Harrisburg with $310 million in debt, more than quadruple its annual budget. On Thursday, the city announced it would not have the funds to pay for a holiday parade this year.

Council members who have opposed the mayor’s plan have also fought the governor’s bill, saying it robs Harrisburg of self-rule. The members, supported by a group of local residents, say Chapter 9, a special bankruptcy statute for municipalities, would give the city more leverage in dealing with its many creditors.

But the state has strongly opposed bankruptcy, in part because it would tarnish the capital’s reputation. It argues that the state has the authority to sort out the city’s problems, and that the bill signed on Thursday would be one of its tools.

Ms. Thompson gave a news conference in Harrisburg, expressing regret that the state would most likely take over the financial workings of the city. The bill allows one last chance for the city to agree on its own rescue plan, and she outlined steps she would take to comply. If that fails, the state will be obliged to step in, she said.

“It’s a sad day for me,” she said. “This has been very painstaking.”

In a statement, Mr. Corbett emphasized that the new law would apply only to financially distressed cities “if there is a failure to act.” Once a fiscal emergency is declared, the city has one final chance to devise a plan, something Harrisburg has been incapable of doing because the Council and mayor are at odds.

If that fails, the city can be placed into receivership, allowing Mr. Corbett to appoint a manager, who would have 30 days to draw up a financial recovery plan. Once a state court approves the plan, the manager would control the city’s finances during the recovery process.

Ms. Roberts said the process would be separate from the legal proceedings in federal bankruptcy court initiated by the City Council. She said the governor believed the bankruptcy petition was illegal and would be thrown out next month when a bankruptcy court judge considers it.

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