Pennsylvania's Capital City Marches Toward Default

linda thompson mayor harrisburg pennsylvaniaMayor Linda Thompson of Harrisburg, Pennsylvania

Photo: AP

The Harrisburg, Pennsylvania City Council yesterday rejected a fiscal recovery plan needed to preserve state aid to Pennsylvania’s capitol city, Bloomberg reports.If Harrisburg is unable to come up with an alternative plan in the next two weeks, the state will cut off aid, and Harrisburg will be unable to pay its creditors.

“I don’t think bondholders will ever be comfortable with the city again in terms of lending us money,” Gloria Martin-Roberts, the council president, told Bloomberg after the vote. “The council made a big mistake tonight.”

The Pennsylvania state aid plan would have forced Harrisburg, which owes five times the amount of its entire budget, to sell certain assets, institute a wage freeze, and alter (downward) city workers’ contracts.

Mayor Linda Thompson said she will try to take an adapted form of the rejected plan back to the council in coming weeks for approval.

Harrisburg has $3.3 million in payment obligations due in September. If it is unable to make those payments, some creditors—including the surrounding Dauphin country—will probably sue.



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