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July 31, 2014, 9:33 am

Pa. lawyers, mayor oppose Harrisburg bankruptcy

  • Written by MARK SCOLFORO
  • Published in News Headlines

HARRISBURG, Pa. — Lawyers for the state of Pennsylvania and Harrisburg's mayor have asked a federal judge to throw out the bankruptcy petition for the city filed this week after a divided City Council voted for it.

Philadelphia attorney Neal Colton filed the state's objections to the bankruptcy on Friday, saying a state law expressly forbids it, while Harrisburg lawyer Kenneth Lee told the court the city and Mayor Linda Thompson believe the petition is not valid.

U.S. Bankruptcy Court Judge Mary France scheduled a status conference on the case Monday morning in Harrisburg.

"No one, least of all the commonwealth, denies that Harrisburg is confronted with serious financial difficulties that must be addressed," wrote Colton, who did not return a phone message. "That is all the more reason, however, why Harrisburg cannot afford to waste any further time and resources on this patently illegal usurpation of the commonwealth's sovereignty."

The law he cited was passed earlier this year to prohibit any third-class city that qualifies under state law as "financially distressed," a description that fits Harrisburg, from filing for bankruptcy until July 2012, and that it would lose all state funding if it did.

"The commonwealth is unaware of any reported case, from any jurisdiction in the United States, in which a municipality such as Harrisburg has so brazenly disregarded an express statutory denial of authority to file a Chapter 9 petition," Colton argued.

Mark D. Schwartz, the lawyer hired by the council to pursue the bankruptcy, said the law is poorly worded and is unconstitutional because it targeted Harrisburg in particular.

"This hardly seems to be a prohibition," he said. "It says you shouldn't, but if you do, this is what happens. OK, fine."

He said a small amount of state funding is at stake.

"If that's the penalty for filing, so be it," Schwartz said.

Lee said the council majority and Schwartz did not have the authority to file for bankruptcy and asked France to dismiss the petition.

"The city is extremely concerned that members of the City Council and attorney Schwartz will attempt to further perpetuate this unauthorized bankruptcy case to the detriment of the city, its creditors and other stakeholders in blatant disregard of the proper procedures for the functioning of the city," Lee wrote in an emergency request filed late Thursday.

Schwartz said Thompson is not entitled to play an active part in the bankruptcy case.

"That may be the one thing the governor, General Assembly and I agree on — she has absolutely no role in these proceedings," he said.

Schwartz filed the Chapter 9 bankruptcy petition after City Council voted 4-3 Tuesday to authorize it. It said the city is saddled with about $458 million in creditors and claims, and is in "imminent jeopardy" from six pending lawsuits related to its aging, debt-saddled municipal incinerator.

The council majority and Thompson have clashed over a recovery plan developed with state officials, leading area state lawmakers to push a bill that would let the governor declare a state of fiscal emergency and install someone to make decisions about government services and spending.

That measure, supported by Gov. Tom Corbett, has passed the House and is expected to be taken up by the Senate next week. -- (AP)