Pennsylvania court approves Harrisburg's new recovery plan

Sept 19 Thu Sep 19, 2013 3:28pm EDT

Sept 19 (Reuters) - Harrisburg, Pennsylvania's capital city, won approval from a state judge on Thursday to proceed with a new fiscal recovery plan that is expected to stabilize the city without having to file for bankruptcy.

Harrisburg, which is mired in more than $362 million in debt from past upgrades to its incinerator, can now move ahead with creditor settlements, the lease of city-owned parking lots and a sale of its waste-to-energy incinerator that is expected to raise up to $132 million.

During a hearing on Thursday, Judge Bonnie Leadbetter, of the Commonwealth Court of Pennsylvania, said that she would approve the revised recovery plan, submitted by the city's state-appointed receiver William Lynch, according to Lynch's lead attorney Mark Kaufman.

The city council on Monday approved legislation that will allow the plan to be implemented.

Some other U.S. cities, struggling to pay for mounting fixed costs or trying to cope with expensive public projects gone bad, could look to Harrisburg as a model for resolving debt problems without having to seek court protection from creditors.

In July, Detroit became the biggest city in U.S. history to seek bankruptcy protection. It needs to pare down more than $18 billion in debt and liabilities.

"There are a lot of cities that are facing this reality. What's going to happen in (one) place is going to have implications elsewhere," Kaufman said. "It's rare that bankruptcy in these situations is going to be the answer. If you can get people to sit at a table and negotiate, why go through the protraction and huge expense of bankruptcy."

Harrisburg filed for bankruptcy in 2011, but a judge threw out the case after state lawmakers banned it.

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