The city of Harrisburg, Pennsylvania, has filed for bankruptcy protection amidst overwhelming debt due to their trash incinerating system, and is in "imminent jeopardy" from lawsuits, as reported by CBS news and other mainstream media outlets.
The bankruptcy has also caused the city council and mayor to be pitted against one another.
The chapter 9 filing lists approximately $458 million in creditors and claims, as well as at least six lawsuits pending against them from unpaid creditors.
Mark D. Schwartz, an attorney for the city council, said, "The city does not have the ability to pay those money judgments or any significant portion thereof and still provide health and safety services to its citizens and other essential government services."
Meanwhile, a spokesman for Mayor Linda Thompson said that the council lacks the authority to seek a bankruptcy filing. Thompson is known for trying to avoid a bankruptcy as she feels it would negatively affect the city's name.
The mayor's spokesman, Robert Philbin said, "There are procedural matters the solicitor objects to, as far as how the resolution was handled, and the quote-unquote hiring of counsel. The solicitor also says only the mayor, in conjunction with the solicitor, can file for bankruptcy on behalf of the City of Harrisburg."
Without Thompson's knowledge, the bankruptcy was voted on and approved in a 4-3 vote by the council - and Thompson is allegedly seeking a law firm to challenge the filing in what she has deemed a "sneak attack."
Thompson said, "I'm ashamed of the behavior, the road jams, the road blocks, the dishonest statements that keep coming out of four members' spirits."
Harrisburg Authority owns the trash incinerator system at the crux of the bankruptcy - the company is an independent government agency, with appointed members.
The Harrisburg Authority company owns the city's water, sewer and incinerator systems.
Per Schwartz, currently $65 million is past due on the $242 million that the city guaranteed it would pay to Harrisburg Authority. Schwartz wrote: "The magnitude of that debt is sufficiently large that it dwarfs the city's other liabilities."
Thompson has been working to avoid bankruptcy by asking for concessions from the city's lenders, taxpayers, labor union and contractors.
Jonathan Hugg, a Philadelphia-based lawyer and an expert in municipal liability, said, "Way back in the beginning, the commonwealth of Pennsylvania set up Harrisburg. I think a savvy creditor is going to argue that, having loosed this thing into the world. The commonwealth is going to be responsible if it doesn't meet its obligations. There's a political problem that's developed with government not being able to increase streams of revenue, this is the final result."
Because of the threat of increased city taxes, per Hugg, residents may also fight the bankruptcy.
City bankruptcies are uncommon - two city bankruptcies of note were both in California: Vallejo and Orange County.
Feeling overwhelmed by crushing debt? Whether you require a business or personal bankruptcy filing, contact a bankruptcy lawyer to assist you in protecting your assets.