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Pa. capital city files for bankruptcy

New York Times / October 13, 2011

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NEW YORK - Harrisburg, Pennsylvania’s financially troubled capital city, filed for bankruptcy yesterday, a move that was at odds with the city’s mayor, who argued that the filing was illegal, and the state, which had pushed to avoid the action.

The filing came a day after the City Council voted 4-3 to approve it, said Brad Koplinski, one of the members who voted in favor of the measure. A lawyer representing the council filed formally for bankruptcy yesterday morning, Koplinski said.

The filing pitched the city into political confusion. A spokesman for Mayor Linda Thompson said in an e-mail that only the mayor, with the city solicitor, had the right to file such a claim. The petition listed debts that totaled more than $400 million. The council has been locked in battle with Thompson for months, voting to reject her state-backed financial bailout plans, largely on the grounds that they demanded too little from creditors. Thompson, for her part, said the council had no better plan and seemed only to be obstructing plans to ease the city’s financial distress. Governor Tom Corbett, a Republican, had also strongly opposed bankruptcy.

Brian Rushow, an administrator at the bankruptcy court, said the city’s application would need to be heard by a judge. That might not happen this week, as all three of the judges were at a conference in Tampa.

Supporters of the bankruptcy say it gives the city more leverage in dealing with creditors.

“It was an extraordinary step, but it needed to be done,’’ Koplinski said.

If the mayor’s rescue plan had been enacted - placing the city into financially distressed status under state law - it would have allowed bondholders and other creditors to be paid off with proceeds of the sale or long-term rental of city assets, he said.

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