Pennsylvania State Capital Mulls Bankruptcy as a Budget Option

Source: Bloomberg

Feb. 4 (Bloomberg) -- Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night.

Every option, including tax and fee increases, bankruptcy and a state takeover through Pennsylvania’s Act 47 municipal oversight program will be considered, said Susan Brown-Wilson, chairwoman of the Budget and Finance Committee, which began a week of hearings last night to consider a 2010 spending plan.

The $68 million in debt service payments that Harrisburg faces in connection with the construction of a waste incinerator this year is four times what the city of 47,000 expects to raise through property taxes, and $4 million more than the city’s entire proposed operating budget.

“We need to see, what does Act 47 do for us; what does bankruptcy do,” Wilson said in an interview during a break in the opening budget hearing at Harrisburg City Hall. “You have to have all of them on the table.”

Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aRLYN3..REz4

Such a travesty how it's all come undone.

God forbid you impose a 1% tax increase to fix your budget and pay your bills. Instead, just declare bankruptcy and screw over the people who trusted you to pay them back.

Lets see how this works for them :grr:

:sarcasm:

I have very close friends that work for the state in PA. Last Aug, one of them told me that he was put on a forced 2 week leave without pay due to budget reasons. His dept was staffed with 5 people, 4 (including him) were put on furlough. He told me that the new budget was to be approved the following week. He hoped he would be called back. Up to that point he was already two weeks behind in pay.

The budget was passed, he and one other were kept, 3 were let go.

He said it felt like an axe just swung past his head.

His wife is a state public defender. She was facing similar problems.

I have to call them and find out what's going on now.

They are good hard working people that actually care about the world around them.

although PA along with so many others continue to try to plug gaps. Fast Eddie managed to get his table games legislation passed which is expected to bring more revenue in (yeah right). The irony is that over here in Philly, this is the first that I have heard about Harrisburg proper being so far in the hole. The local news can be so eager doing crime reports from spots around the world but little on important things like this.

Also, the courts ruled that those furloughs were illegal.

http://www.philly.com/inquirer/local/20091229_Court_rules_against_Rendell_on_furloughs.html">http://www.philly.com/inquirer/local/20091229_Court_rules_against_Rendell_on_furloughs.html

Haven't heard how they were going to compensate for that (maybe they have by now)...

bigger profits. If all city governments just declared bankruptcy on their ever increasing fees and interest charges then we'd all be in better shape (except for the bankers who make their money off that interest).

then they'd really be free of things like lending and the banks.

it could conserve more resources. The way that state runs its gov't is assanine from the top, down.

Reading this story reminds me of the 1997 book, CONFESSIONS OF AN ECONOMIC HITMAN by John Perkins. Harrisburg's predicament sounds like what happened to sovereign countries after borrowing huge sums for often excessive infrastructure, benefiting only the wealthy if anyone, that could never realistically by repaid without screwing the middle and working classes.

When the debt service annually is much more than the yearly income some horrible decisions had to have been made. The kind of decisions that benefited the corporatocracy, the huge engineering and construction firms, the banks and insurance oligopolies and inept or corrupt, or both, local decision makers.

We are the new "third world"...

That is not the debt, just their SERVICE on their debt, which means the actual amount is somewhere in the range of 100x that.

which is a function of the credit-worthiness, ie: the anticipated risk, and the general market for return on capital when issued/sold.

Tax-free municipal, typically insured, bonds are sold by solid issuers at rates as low as 4%, or even less in certain situations.