Harrisburg, Pa. Files For Bankruptcy

(Bloomberg) Harrisburg, Pennsylvania, facing a state takeover of its finances, filed for bankruptcy protection after failing to pay the debt on a trash-to-energy incinerator.

The council made its 4-3 decision against the advice of a city attorney who said the panel did not follow proper procedure. It’s the ninth bankruptcy filing this year by a municipal-bond issuer, and the first by a U.S. state capital since 1980 when the municipal bankruptcy laws were overhauled, said James Spiotto, a partner at Chapman & Cutler in Chicago who tracks such cases.

“This was a last resort,” Mark D. Schwartz, the council’s Bryn Mawr-based lawyer, said after he faxed the documents to a federal court yesterday. “They’re at their wits’ end.”

Harrisburg is the biggest city to file for bankruptcy since Vallejo, California, filed in 2008, according to a ranking by Municipal Market Advisors, a research firm in Concord, Massachusetts. Municipalities across the nation have been battered by the financial crisis. Harrisburg’s filing came less than a month after Alabama’s Jefferson County Commission voted to try to avert what would have been the nation’s biggest municipal bankruptcy, and nine months after Vallejo emerged.