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Pa. governor takes fiscal reins of debt-strapped capital

Harrisburg gets 30 days to devise plan to avert insolvency

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Pennsylvania Gov. Tom Corbett on Monday declared a fiscal emergency in the state capital of Harrisburg, removing much of the authority over police, firefighting, trash collection and other services from city officials and placing it in the hands of his administration.

The move grants Mr. Corbett's secretary of community and economic development, C. Alan Walker, power over much of Harrisburg's checkbook and gives city officials 30 days to develop their own recovery plan or face a full-blown state takeover.

The city of just under 50,000 sits on the verge of insolvency and is more than $300 million in debt, the vast majority tied to payments on a failed trash-incinerator project.

"City Council's failure to enact a recovery plan in order to deal with the city's distressed finances has led me to declare a fiscal emergency," Mr. Corbett, a first-term Republican, said in a statement. "This action ensures that vital services will continue and public safety will be protected."

Harrisburg Mayor Linda D. Thompson and the City Council have thus far failed to reach a compromise on how to deal with the city's debts. If they can't do so within 30 days, state officials will seek to place the city in receivership. The court-appointed receiver would then implement a long-term plan to get Harrisburg out of the red, likely by selling the incinerator and leasing the city's parking garages.

At least two parties are interested in buying the incinerator, according to Thompson spokesman Robert Philbin. The money generated from that sale, coupled with long-term parking garage leases, he said, would likely cover much or all of the city's debt.

Harrisburg could still avert a complete takeover if the mayor and City Council, who have frequently clashed since the mayor took office in January 2010, agree on a blueprint to repay the city's debt. That plan would then be subject to state approval.

"Hopefully, we can pull together for the good of our citizens and stop the so-called takeover of our city's financial recovery," Ms. Thompson said in a statement last week, after Mr. Corbett signed legislation giving him the authority to declare a fiscal emergency and proceed with a takeover. She also expressed optimism that despite their political differences, the two sides could come together.

"We have to have confidence as elected officials to understand that we can serve our citizens and return this city to financial solvency through an orderly process," she said. "If we don't attempt to solve our own problems, the alternatives will be far worse."

As Mr. Corbett moves forward with state intervention, the City Council is forging ahead on its own path. Two weeks ago, it voted 4-3 to file for Chapter 9 municipal bankruptcy protection, despite strong objections from Ms. Thompson, a Democrat. That dispute is now headed for court, with the city's lawyers arguing that the council does not have the power to file for bankruptcy without mayoral consent. The mayor and many others expect a judge to toss out the bankruptcy filing.

While the incinerator project bears much of the blame for Harrisburg's financial turmoil, others have pointed fingers at Ms. Thompson, who has seen many key members of her staff resign over the past 21 months, citing her combative style and a poor work environment. The Thompson administration, however, has denied those allegations and criticized members of City Council for obstructing her every move for political purposes.

The financial mismanagement and political gridlock has taken its toll. Last week, Ms. Thompson announced that the city's annual November parade, a tradition since 1986, has been canceled as a result of lack of funds. Harrisburg had sought private donors to fund the event, but that plan never materialized.

The state is expected to complete its "emergency action plan" for Harrisburg within 10 days, prioritizing bills and ensuring that first responders are paid.

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