Summertime Bankruptcy for Harrisburg?

Harrisburg’s chances to sort out its debt in bankruptcy court seemed to have finally run out last week when a Pennsylvania district court quickly threw out the City Council’s latest appeal of its dismissed Chapter 9 bankruptcy filing.

But it looks like the troubled state capital could wind back up in bankruptcy court this summer if no other agreement can be reached with creditors. That’s the state-appointed receiver’s plan for the city, which is burdened by $300 million in debt from a failed incinerator project.

After the City Council filed for Chapter 9, or municipal bankruptcy protection, last October, Pennsylvania Gov. Tom Corbett insisted the filing violated city and state laws. The state fought hard to keep Harrisburg out of the bankruptcy-court system, even passing an emergency order giving Corbett the authority to appoint this receiver.

The state won out. A receiver was appointed, the Chapter 9 filing was dismissed, and the receiver’s plan was released Monday.

The plan itself is fairly simple. First, Harrisburg must figure out how much the incinerator is worth. Harrisburg Authority and Harrisburg Parking Authority are required to request proposals to determine the value of Harrisburg’s assets within 30 days.

Then, with that information, Harrisburg will negotiate with those it owes money, potentially selling or leasing certain assets including the incinerator and the parking garages. An agreement will be reached by June.

And if that doesn’t work, the city will go back into bankruptcy.

“Assuming that a comprehensive solution is achieved, the receiver will file an amendment to this plan with the Commonwealth Court indicating consensual agreements with stakeholders and detailing the terms of the plan. If a comprehensive solution is not agreed upon, the receiver is prepared to file for bankruptcy under Chapter 9 of the Bankruptcy Code in order to protect the ability of the city to perform its vital necessary services,” the receiver said in the plan.

Mark Schwartz, the attorney who has been representing the City Council during its attempts to file for bankruptcy, told The Wall Street Journal that the plan won’t work. “I think the numbers are just too far out of line, no matter what the incinerator could be sold for.”