Tuesday, July 10, 2012

State of Pennsylvania won't let cities file bankruptcy

The current Scranton "austerity plan" of paying minimum wage to city employees can't last very long.  Meantime, Harrisburg seems to be managing better.  These Pennsylvania cities and others may try again to file bankruptcy with the state from November 30, 2012 or later.

MISH's Global Economic Trend Analysis blog,  Mike "Mish" Shedlock. "Scranton mayor slashes all public worker wages to $7.25 per hour, including police, fire, his own, city effectively bankrupt." 

"Scranton, Pennsylvania's, the state's sixth-most-populous city (population of 76,089 in 2010 census), is down to its last $5,000 and has no way to pay salaries The mayor wants an immediate tax hike of 29% and 78% over three years. In every sense of the word, Scranton is bankrupt.

NPR reports Scranton's Public Workers Now Paid Minimum Wage..... Filling in a few more details, IBT reports Scranton Mayor Slashes City Workers' Pay To Minimum Wage  .... .
What's the problem, borrow, tax, cookie sale?
City Effectively Bankrupt.  It should be perfectly obvious to every soul on the planet that Scranton is bankrupt. Tax hikes are not the answer. The solution is filing bankruptcy with the hope of killing public union wages and benefits. However, inane rules in Pennsylvania prohibit cities from filing bankruptcy without state approval.

On October 12, 2011 I reported  Pennsylvania State Capital Files for Bankruptcy.  Unfortunately, City of Harrisburg chapter 9 bankruptcy dismissed .
The US Bankruptcy Court for the Middle District of Pennsylvania has dismissed the bankruptcy petition filed on behalf of the City of Harrisburg, Pennsylvania, finding that the city failed to meet eligibility requirements under the Bankruptcy Code to be a chapter 9 debtor.  The dismissal of Harrisburg’s petition, in November 2011, highlights the US constitutional considerations in municipal bankruptcy cases and the Bankruptcy Code’s strict requirement for a municipality to have express state authorization to become a chapter 9 debtor.
Inept city management, with public union wages and benefits at the heart of it, killed Scranton.  The city is bankrupt. Period. Will the state once again deny the obvious?"  Read full article.

Reference - Scranton, PA - City of Scranton, PA.  Also see  CNN Money, 5/15/08, "10 fastest growing real estate markets.Business Insider/Mike "Mish" Shedlock, 7/10/12.

Related - Harrisburg, PA - City of Harrisburg, PA.Pennlive.com, Harrisburg bankruptcy articlesEric Veronikis, The Patriot-News, 7/9/12. "Gov. Tom Corbett signed legislation extending the bankruptcy prohibition for five months; his office would not share his rationale for signing Senate Bill 1263. And Corbett did little to explain why he supported it shortly after signing the legislation into law. The bill prevents Harrisburg and other cash-strapped third-class cities from filing for bankruptcy protection until Nov. 30."

Submitted by Jim Alex

Posted by Kathy Meeh

1 comment:

Anonymous said...

San Bernadino is filing bankruptcy. Population 200,000 and a budget deficit of $45 million. Can't make payroll or pay vendors. Their city attorney alleges that over the past decade council has been presented with falsified budget numbers. Yep, there goes another one.