FACULTY MEMBER FEATURED : DAVID FIORENZA (ECONOMICS) DATE: NOV. 22, 2011 MEDIA OUTLET: PENNLIVE.COM AUTHOR: ERIC VERONIKIS
Bankruptcy hearing affects more than Harrisburg, finance experts say Debt-hobbled Harrisburg’s options might soon be whittled down to one: a state takeover. Arguments begin this morning to help federal bankruptcy Judge Mary France decide whether City Council had the legal right to file its municipal bankruptcy petition last month. The hearing is expected to last several days. More than the future of Harrisburg is at stake. Capital city employees could be hit with a commuter tax. Municipalities around the state could see higher borrowing costs, and bond markets around the world are concerned. Should France decide that the council didn’t have the right to file for bankruptcy, the state takeover is a lock and a state-appointed receiver would take over Harrisburg’s finances. The receiver would be charged with implementing a fiscal-recovery plan for the city. If France decides Harrisburg was within its rights to file, the council improves its chance of averting the takeover, but Harrisburg would have to jump through one more hoop to get into bankruptcy. France still would rule on whether the city’s fiscal crisis would allow it to receive bankruptcy protection. And city officials still would be forced to develop a fiscal-recovery plan approved by the bankruptcy court if it gets Chapter 9, and City Council thus far has been unable to produce such a plan. “What is at stake is the long-term growth and economic development of the city,” said municipal finance expert David Fiorenza, professor at Villanova University School of Business. “A couple of things go into it. The Democratic majority on City Council, and you have a Republican governor. I think that plays into it. Some of it has to do with noneconomic issues like pride.” Mark Schwartz, the attorney the council hired to file its bankruptcy petition, will argue that the state’s Act 47 program did not give Harrisburg real relief from its $317 million in incinerator debt.
2011 Media Report Villanova School of Business Page 230