Harrisburg Considers Bankruptcy, Act 47

Last night, Harrisburg officials held a hearing to determine if the city qualifies for Pennsylvania’s Municipalities Financial Recovery Program, Act 47. Mayor Linda Thompson and Governor Rendell support entrance into the Act 47 program, but only 6 of the 25 cities who have entered the program have escaped distressed status.

The other option, supported by many city residents, is bankruptcy. A new citizens group, called Debt Watch Harrisburg, argues the bond holders backing the incinerator took a risk and should now take a loss.

Bankruptcy or Act 47, Harrisburg is in big trouble. The Patriot News reports:

In a largely technical report on the city’s woes, her interim chief of staff and finance director, Robert Kroboth, noted the city only has about $330,000 cash on hand — but faces a $1.2 million payroll due next week.

At the beginning of this month, the city accepted grants, loans, and expedited aid from the state and now is looking to collect advance payments from the school district, Harrisburg Authority, and Parking Authority to make payroll. Additionally, the Harrisburg Parking Authority is discussing a plan to borrow against its future revenues to help the city out.

More borrowing is not the answer. If Harrisburg is ever to emerge from this fiscal mess they’ll have to stop accumulating debt and begin to rein in spending. For more policy solutions, see my recent commentary on Harrisburg’s Woes.