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Harrisburg City Council Loses Bankruptcy Appeal

The U.S. Third Circuit Court of Appeals ruled against the Harrisburg, PA city council this week, dismissing their attempt to restart Chapter 9 bankruptcy proceedings.

The debt-saddled city council petitioned for Chapter 9 protection in November of last year, but its filing was rejected by U.S. Bankruptcy Judge Mary France, who noted that it wasn't authorized by Pennsylvania state law. The city council appealed the ruling, but the Third Circuit confirmed France's original decision.

Harrisburg is insolvent due in part to a $300 million retrofit to the city's trash incinerator that failed to generate enough revenue. The city's council hoped to use the Chapter 9 process to fend off creditors demanding payment and restructure their debt, but the state government, Harrisburg Mayor Linda Thompson, Dauphin County—in which Harrisburg is located—and now the state's Bankruptcy and Appeals Courts have either opposed or rejected the council's bankruptcy filing.

The council can request a new hearing on their appeal, or re-file their Chapter 9 petition in July, should they win support from Mayor Thompson.

Harrisburg's insolvency saga most recently took a turn for the uncertain when state-appointed receiver David Unkovic resigned from the position with almost no notice, citing potential political and ethical issues related to the incinerator project. In response, Pennsylvania Governor Tom Corbett appointed a new receiver, retired U.S. Air Force Major General William Lynch, who will take over Unkovic's authority to impose a financial recovery plan on the city. Confirmation of Lynch's appointment will take place at a hearing in a state court later this month.

- Jacob Barron, CICP, NACM staff writer