HARRISBURG, Pa. - (Mealey's) The City of Harrisburg filed for Chapter 9 bankruptcy on Oct. 11, citing a $310 million debt from projected budget deficits combined with outstanding bond issues related to financing the city obtained for its trash incinerator, which processes waste into steam and electrical energy (In Re: The City of Harrisburg, Pa., No. 11-06938, Ch.9, M.D. Pa. Bkcy.).
The city filed its petition in the U.S. Bankruptcy Court for the Middle District of Pennsylvania, contending that it is in jeopardy of insolvency as a result of debt related to the Harrisburg Materials, Energy, Recycling and Recovery Facilities, known as the incinerator. The city is the owner and operator of the facility, and it is unable to pay bondholders.
The total amount of principal guaranteed by the city is approximately $242 million, according to the bankruptcy petition. The total amount past due is $65 million. The city has a projected $3 million deficit for 2011 without paying its guaranteed bond obligations.
The city contends that its financial problems can be solved only by using the "cram down" remedies available under the Financially Distressed Municipalities Act, 53 Pennsylvania Statutes Section 11701.101, et seq., known as Act 47. However, because the Harrisburg City Council has refused to accept the recommendations of a proposed Act 47 plan, the city contends, it is forced to file for bankruptcy.
The city also faces creditor lawsuits filed by the County of Dauphin, two lawsuits filed by the County of Dauphin and Joseph and Jacalyn Lahr, two lawsuits by TD Bank NA and another suit filed by Covanta Harrisburg Inc. Harrisburg is the county seat for Dauphin County.
The city lists $228,179,808 in debt owed to TD Bank, its largest creditor. Covanta is listed as the city's second largest creditor, with claims of $124,452,500.
[Editor's Note: Full coverage will be in the Oct. 19 issue of the LexisNexis Commercial Bankruptcy Report. In the meantime, the petition is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844. Document #89-111019-007C. For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]
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