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Talks on Harrisburg recovery plan deadlocked

November 11, 2011

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HARRISBURG, Pa.—With a Monday deadline looming, Harrisburg's mayor and City Council were deadlocked Friday over a financial recovery plan for Pennsylvania's struggling state capital.

Both sides said they are willing to continue the discussions, but no further meetings are scheduled.

The city has until Monday to submit to the state Department of Community and Economic Development a plan for paying down $300 million in debt tied to the city's incinerator and stop a potential state takeover under a newly passed law.

A majority on the council has filed for bankruptcy protection in an effort to get the city's creditors to forgive $100 million of that debt, but the largest of the creditors -- bond insurer Assured Guaranty Municipal Corp. -- rejected that idea Wednesday.

A federal bankruptcy judge has set a Nov. 23 court date for oral arguments on legal questions surrounding the Chapter 9 filing.

The takeover law gives Harrisburg a grace period of 30 days, ending Nov. 25, to develop a financial recovery plan. If those 30 days pass without a plan agreeable to the city and the state, the state Commonwealth Court could authorize Gov. Tom Corbett to appoint a receiver with the power to sell city assets and approve contracts -- but not raise taxes -- to pay down the city's debt.

On Wednesday, Alabama's most populous county filed a Chapter 9 petition representing the largest municipal bankruptcy in U.S. history in a bid to regain control of its sewer system and wipe away as much of its $4.15 billion in debt as possible.

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