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US Judge Calls Harrisburg Bankruptcy Filing Illegal

Federal bankruptcy Judge Mary D. France has ruled that Pennsylvania's capital city of Harrisburg may not seek bankruptcy protection, calling such a filing illegal.

Harrisburg, PA
Jeremy Woodhouse | The Image Bank | Getty Images
Harrisburg, PA

France issued the ruling Wednesday after hearing more than two hours of arguments by lawyers as to whether the bankruptcy petition that was filed by Harrisburg City Council could move forward despite the objections of the city's mayor, Pennsylvania Gov. Tom Corbett, Dauphin County, bond issuers and others.

The Susquehanna River city of 50,000 is saddled with about $300 million in debt tied to its nearly 40-year-old trash incinerator.

A City Council member said the group will decide whether or not to appeal.

In the meantime, the Corbett administration is moving to take over many of the city's financial operations in a bid to force it to pay down the debt.

France dismissed many of the arguments made by a lawyer for City Council, but focused arguments on two key areas.

While admitting that she typically doesn't consider matters of state and constitutional law, France had questioned Wednesday whether a four-month-old state law designed to temporarily prohibit a bankruptcy filing by Harrisburg had met state constitutional standards that demand transparency in the passage of legislation.

In the end, she said it did.

She also questioned whether a divided Harrisburg City Council indeed had the authority to go over the mayor's head and file for bankruptcy. After the arguments, she said it didn't.

The Susquehanna River city of 50,000 is saddled with about $300 million in debt tied to its nearly 40-year-old trash incinerator.

Beset by environmental problems and fines for years, U.S. Environmental Protection Agency shut it down in 2003 with about $100 million in debt already piled on it, some of which had gone to finance other city projects.

Faced with the decision to abandon it and clean up the site, or finance an overhaul, City Council voted for the latter in hopes that it would one day emerge as a profitable investment.

But the renovation went awry, and ended up being far more expensive.

Meanwhile, Harrisburg city residents now pay among the highest trash-disposal rates in the nation, while the facility can't generate nearly enough money to pay the debt.

The divided City Council voted last month to file the Chapter 9 petition in a bid to thwart a state takeover and force concessions from creditors.

Mayor Linda Thompson and City Council had been unable to come up with a debt repayment plan, as the city fell tens of millions of dollars behind on debt payments and lawsuits piled up.