City of Harrisburg Files for Bankruptcy Protection

October 13 00:00 2011

New York, October 13 ( – The city of Harrisburg, Pa., filed for bankruptcy protection Wednesday. Protagonists of the move said that this was the only alternative to a state takeover that would have meant that the city would have had to pay off its Wall Street creditors by selling its most lucrative assets. Moreover it was a hotly contested and emotional issue in Pennsylvania’s capital city.

Mayor Linda D. Thompson (D) opposed the move saying that an embarrassing mark would be left on the city due to the bankruptcy. He added that the city of 49,000 would not be able to borrow for municipal projects in the future. She refused to sign the bankruptcy filing calling the bankruptcy illegal after a member of the City Council signed it.

An increasing number of municipalities across the country are in the doldrums as they are facing mounting debt and declining revenue in the aftermath of the recession. If the bankruptcy filing stands, Harrisburg would be the largest municipality to have done so after Vallejo, Calif., in 2008.

Harrisburg has been reeling under a heavy debt burden, out of which $300 million is connected to an incinerator project that backfired. Payments for the incinerator loans have been suspended by the city but nearly a quarter of its budget is spent on servicing debt payments, leaving inadequate funds for basic city services.