A bankruptcy judge on Wednesday tossed out Harrisburg’s Chapter 9 bankruptcy case, putting Pennsylvania’s capital on the path to mitigate its financial malaise under the state’s guidance.
Judge Mary France of the U.S. Bankruptcy Court in Harrisburg ruled that the Harrisburg City Council did not have the authority to place the city of roughly 49,000 residents under bankruptcy protection. The Chapter 9 petition was filed on Oct. 11.
“For Chapter 9 bankruptcy to work, all of the branches of a municipality must be on the same page,” Judge France said at a court hearing Wednesday afternoon.
State leaders, bondholders and even the city’s Mayor argued for the case to be thrown out of court, saying it violated the state’s rules laid out for financially struggling cities.
Harrisburg faces roughly $300 million in growing debt from a financially failed incinerator project that was meant to turn the city’s waste into energy.
This action allows the State of Pennsylvania to move forward on its takeover of the city’s finances. Late last week, Pennsylvania Gov. Tom Corbett, directed a state agency to ask a state judge to appoint bond attorney David Unkovic as the city’s receiver—a step that would put the finances of the city under his control.
All states are required to lay out rules for municipalities to file for bankruptcy. Nearly half of U.S. states either prohibit or don’t expressively authorize local municipalities to file Chapter 9. Many other states set limits on municipal-bankruptcy filings.
