The Latest On Harrisburg

Bankruptcy Judge Mary France has dismissed Harrisburg's Chapter 9 petition, ruling the city did not have the authority to file under state law.  See this post for my initial comments on the filing last month.  Mayor Linda Thompson and a minority of the city council have fought the filing all along.  I have not seen the ruling, but apparently it was based on two grounds: 1) Act 26 that the Pennsylvania legislature passed this year bars Harrisburg from filing, and 2) the authorizing resolution was invalid because it was not presented to the city solicitor first.


We'll see how this plays out.  First, I question whether Act 26 is actually constitutional, regardless of Judge France's ruling that it is.  Given that it targets Harrisburg alone among all the municipalities in Pennsylvania, it has to be vulnerable to an equal protection challenge.  Second, if the council can get around Act 26 and wants to refile, it can streamroll the city solicitor.  The law only requires that the resolution be presented to the city solicitor, not that he approve it.  "Here's this resolution we're going to pass.  Don't like it?  Pound sand!"  Believe me, I've been to that rodeo more than once.


If the decision stands, the mayor and the council minority are going to learn you should be careful what you wish for.  Once a receiver takes over, their authority is going to be reduced to the name plaques on their doors.  And maybe not even that.

Another Muni BK

So we have another municipal bankruptcy filing, this one in Alabama.  And it's a biggun, with over $5 billion in debt, sure to send some shockwaves through the bond markets (The centerpiece of this solid waste is a series of sewer bonds.).  The one bright spot is that this isn't the result of anything systemic but rather of outright corruption, and that people have actually gone to prison for it (Gee, how did that ever happen?).


What I can't believe in all this is the remark by the receiver, John Young Jr., that the filing is an "utterly irresponsible act".  Excuse me, but allowing the public purse to continue to be eaten away by creditors who were ratcheting up the terms of the settlement would have been utterly irresponsible.  Your job, though, was to keep the creditors in line, and you failed, so if we're talking about "irresponsible"....


The remark I can believe is the one by the JPMorgoth Chase spokescritter, just not in the way she intended.  I bet JPMC wanted to avoid a BK filing; in Chapter 9 its backroom maneuvering and political clout are severely curtailed (Duplicity by JPMC?  I'm shocked, shocked!  Just because I've had two VP-level JPMC counsel lie to my face in multi-million dollar cases....).  Sorry, people, you overplayed your hand and left Jefferson County with no choice.