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Harrisburg City Council responds to Objections to Chapter 9 Eligibility

BY BILL KANNEL

As expected the Harrisburg City Council has filed a reply to the numerous objections to the Chapter 9 filing of Harrisburg initiated by the City Council.  The City Council’s brief (Harrisburg response.pdf) appears to be the only timely filed reply to the objections to the Chapter 9 filing.

The brief appears to devote significant space to issues outside of the Bankruptcy Court’s request for briefing.  With respect to specific issues the Bankruptcy Court asked to be addressed the City Council makes the following arguments.

  • Specific State Authority to File

The Council argues that Harrisburg was specifically authorized to file a Chapter 9 bankruptcy under Act 47, the Pennsylvania statute dealing with distressed municipalities.  The Council argues that access to bankruptcy is to be liberally construed and that Act 26, which amended the Pennsylvania Fiscal Code to prohibit “cities of the third class” such as Harrisburg from filing under Chapter 9 until July 1, 2012, was “. . . enacted without debate or ascertainable knowledge of those who voted on it....”  The brief also argues that Act 26 violated the impairment of contract clause of the United States Constitution because the prohibition on filing did not exist when Harrisburg became subject to Act 47 and that Act 26 also violates the equal protection clause of the United States Constitution and the Pennsylvania constitution.

  • City Counsel Authority under Local Law or Ordinance

With respect to the issue of whether the Council itself was authorized under local law or ordinance to file a bankruptcy petition, the Council's brief is not entirely clear but appears to make arguments based on separation of powers between the City Council and the Mayor’s Office and  the city solicitor's status as only an “acting solicitor”.

We did not find the City Council’s brief particularly compelling or effective in rebutting the objections to the Harrisburg's Chapter 9 filing.

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Authors

Leonard Weiser-Varon serves as bond counsel, purchasers’ counsel, bondholders’ counsel and trustee’s counsel on municipal bond issues, workouts and restructurings. Len also represents state sponsors and private program managers of Section 529 and 529A savings programs.

William W. Kannel

Member / Chair, Bankruptcy & Restructuring Practice

William W. Kannel is the Chair of Mintz’s national Bankruptcy & Restructuring Practice. Bill has experience in corporate and municipal reorganizations and debt restructurings. He represents both creditors and debtors in all phases of distressed debt negotiations, bankruptcy litigation, and distressed asset acquisitions.