"This was a gut-wrenching and agonizing decision," she said, "but in the end, it's the only decision I could make if the capital city was to keep functioning."
For several months, Harrisburg city officials have been contemplating filing for bankruptcy, creating waves of concern in the financial markets. Filing for bankruptcy would have jeopardized the city's access to the credit market and put its fate in the hands of a bankruptcy judge.
At the heart of Harrisburg's financial problems is the massive debt incurred by a city authority to retrofit and maintain its aging and inefficient incinerator, beginning in the 1990s.
This year, Harrisburg leaders acknowledged they could not make roughly $68 million in debt payments. The city, which backed that debt, was also in danger of missing a payment on general-obligation bonds, generally more reliable securities that municipalities strive to ensure are paid on time.
In applying for distressed-city status Friday, Harrisburg officials said they expected to default on payments that were due Friday, as well as on three other payments before the end of the year. They did not explain in the application which payments those were.
As a result, officials have been scrambling to negotiate a solution that could stave off a declaration of bankruptcy.
Under Act 47, the state would pay for a team of financial experts to help the city craft a recovery plan. Harrisburg would also have access to loans and grants from the state to implement that plan, said Fred Reddig, executive director of Pennsylvania's Department of Community and Economic Development unit overseeing the Act 47 program.
