2010-10-07 / Local & State

Pa.’s Troubled Capital City To Seek State’s Help

HARRISBURG, Pa. (AP) – The mayor of Pennsylvania’s troubled capital city will formally apply for state help in sorting out its dire financial situation, a newspaper reported Friday.

The Patriot-News of Harrisburg said Mayor Linda Thompson would make the announcement Friday. The mayor’s office said Gov. Ed Rendell will join her at a noon news conference at city hall.

The move comes amid a bitter stalemate between Thompson and City Council. On Tuesday, City Council rejected Thompson’s plan to hire a financial firm she picked to guide the city through its fiscal problems.

The city is running a budget deficit this year and owes more than $280 million on its recently renovated trash incinerator that it has no strategy on how to pay off.

More than two dozen municipalities have entered the state’s “distressed city’’ program in just over two decades, including Pittsburgh and Reading. It involves help with financial planning and analysis, but not a bailout.

It also does not preclude the city from eventually declaring Chapter 9 bankruptcy, as some city officials have advocated doing as a tactic to force concessions from lenders on its trash incinerator.

Thompson has said she opposes bankruptcy, and advocates selling city assets to help pay off some debt.

Earlier in September, Rendell stepped in with financial help after Thompson riled municipal bond markets by putting Harrisburg on track to become the nation’s second-largest borrower to default on a general obligation bond this year.

Thompson had framed the decision to skip a $3.3 million general obligation bond payment as a choice to keep crucial services operating and city employees, firefighters and police on the payroll.

However, bondholder representatives sued the city to collect tens of millions of dollars in overdue debt payments.

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