November 28 2012
In October 2011 Harrisburg, Pennsylvania petitioned for bankruptcy after reaching debts of over $300 million, quadruple its annual budget. The petition was denied by a federal judge, and claimed illegal, as the state or mayor did not sign off on the filing. Today, the city’s debt stands at over $340 million. A state ban that prevented Harrisburg from filing for municipal bankruptcy protection in 2011 is set to expire November 30, 2012 putting a possible petition for bankruptcy back on the table.
Municipal bankruptcies don’t happen over night. They are usually the result of a variety of causes, but Harrisburg’s threat of bankruptcy is attributed mainly to a large-scale infrastructure project that went terribly wrong.
After the city’s trash incinerator was closed down by the Environmental Protection Agency in 2003, due to air pollution concerns, the city had to decide whether to scrap the project in its entirety or to retrofit and expand with the hopes of creating a profit generating resource. The city decided to do the latter, with the aim of burning up to 800 tons of trash a day
, allowing Harrisburg to take on neighboring counties garbage and generate enough revenue for the incinerator to pay for itself, and earn a future profit. But the business didn’t pour in as the city had expected, and Harrisburg’s debt continued to grow while citizens were left paying among the highest trash-disposal rates in the nation
Today, many still question what went wrong, and why millions of dollars in bonds were issued into a plan that was clearly not sustainable. While most of the fingers point to Barlow, the engineers in charge of the incinerator retrofit, there are many to blame for this financial fiasco, including the elected officials, the advisers and consultants, the attorneys, and others who ignored the red flags.
After a year of undergoing receivership, Harrisburg is still fighting to recover. Many wonder if declaring bankruptcy is the only answer for Harrisburg.
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