State could take control of Harrisburg, Corbett warns
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HARRISBURG -- Gov. Tom Corbett is warning of a takeover of the state's financially troubled capital if city leaders do not produce a recovery plan.
Harrisburg Mayor Linda Thompson spoke to reporters Friday to relay the governor's comments from her meeting with him earlier in the day as she lobbies city council to approve her plan.
Mr. Corbett, a Republican, took the same position in a Tuesday letter to her, The Patriot-News of Harrisburg reported.
"If there is no approved plan at this point, then the city is likely to become mired in litigation and financial chaos," Mr. Corbett told Ms. Thompson in the letter. "If the latter occurs, the commonwealth will not bail out the city. Indeed, if the city continues down the path of irresponsible economic decision-making, it is probable that legislative action will result in the city losing control of its ability to make such decisions."
If city council defeats Ms. Thompson's plan, Mr. Corbett told her that he would sign a bill that would create a management board with broad powers to oversee the city. That Republican-sponsored bill passed the state Senate in June over the protests of Democrats and is pending in the GOP-controlled state House of Representatives.
Some city officials have suggested that Harrisburg should seek federal bankruptcy protection as a way to force concessions from lenders. But that could cause the city to lose state aid. Mr. Corbett signed a bill on June 30 that would stop state aid for Harrisburg and dozens of other small- to medium-sized cities for seeking federal bankruptcy protection through next July.
City council has scheduled a Wednesday meeting to consider Ms. Thompson's plan to relieve about $300 million in debt tied to the city's trash incinerator and to close a multimillion-dollar budget deficit that could leave the city without enough money to make its payroll this fall. That plan includes selling the incinerator and leasing the city's parking garages to a private operator in exchange for a large upfront payment to help pay down the debt.
Last month, city council voted 4-3 to reject a plan by a state-appointed task force, the first time that had happened in the 24-year history of a state law designed to help financially distressed cities.
Opponents protested that the only sacrifices would be made by Harrisburg's citizens and not by lenders, backers of the bonds or the professionals who over the years advised the city while it borrowed its way into a deep hole of debt.
In her plan, Ms. Thompson has sought more concessions from Dauphin County, which backed a portion of the debt, the bond insurers and the state to help close $26 million in debt that the state task force's plan would have left over.
Meanwhile, Dauphin County, two banks and New York-based bond insurer Assured Guaranty have lawsuits pending against Harrisburg seeking to recoup tens of millions of dollars in debt payments the city didn't make on time. City officials have warned that a ruling against Harrisburg could push it into bankruptcy.
First Published August 27, 2011 12:00 am