Capital City is Distressed

A press release from the state’s Department of Community and Economic Development (DCED) yesterday ended the suspense about the status of Pennsylvania’s capital city of Harrisburg as to whether the City would be declared financially distressed under Act 47. It has been done; Harrisburg is now the 20th city in Act 47.

Fully one-half of the Commonwealth’s ten largest cities, representing about 16% of total population based on Census data, are now under some sort of state oversight-either a cooperation authority (Philadelphia), Act 47 (Harrisburg, Scranton, and Reading) or both (Pittsburgh).

DCED’s secretary noted in the release that that the designation will soon be followed by "a comprehensive recovery plan that will lay the groundwork for long-term financial solvency" that will get the City back on track.Recovery could take a long time: eleven Act 47 communities have been in that status since 1995 or earlier. Only one community (Ambridge) entered and exited distressed status in a period of three years.

An interesting angle to the determination was that a separate community group petitioned DCED to direct Harrisburg to file for Chapter 9 municipal bankruptcy. The press release and the DCED order noted the conditions for bankruptcy outlined in Act 47, and among them there is no mention that DCED can compel a city to file for Chapter 9.

The Allegheny Institute’s recommendations on Chapter 9, included in our most recent report, include streamlining the process for pursuing a bankruptcy filing and creating an independent panel to review filings so as to prevent misuse.