This really is our only option out there.

October 13, 2011 6:01 AM

Harrisburg City Council votes 4-3 in favor of Chapter 9 municipal bankruptcy protection. Pennsylvania's capital city filed for bankruptcy protection from creditors Wednesday, becoming the third city to file this year. In August, Central Falls, R.I. filed for bankruptcy protection after retired city workers refused to accept an offer to cut their pensions. In March Boise County Idaho became the first municipality for seek Chapter 9 protection.

There have been about eight municipal bankruptcies per year in the U.S. for the past four decades. Among the most famous cases: Orange County, Calif., in 1994 and Vallejo, Calif., in 2008.

Harrisburg Councilman Brad Koplinski introduced both resolutions Tuesday night and said the bond insurance company Assured Guaranty Municipal Corp., which backed much of the city’s incinerator debt, has to step up with at least $100 million in concessions to make any plan work.

Experts call bankruptcy approval unlikely.

posted by three blind mice (37 comments total)

N.B. The Orange County, Calif., link takes you to a pdf.
posted by three blind mice at 6:04 AM on October 13, 2011

This is going to be a huge surprise to people who didn't know that neither Philadelphia nor Pittsburgh is Pennsylvania's capital city.
posted by Curious Artificer at 6:11 AM on October 13, 2011 [9 favorites]

Where did the money go? I know a friend of mine was part of a multi-million dollar settlement over police state bullshit in Harrisburg, but I think the lawsuit against the city itself was thrown out.
posted by empath at 6:12 AM on October 13, 2011

Much, much more background coverage can be found here. An already bad situation is complicated by widespread local dislike for Mayor Linda Thompson, so you might want to avoid the comments attached to these articles.
posted by MonkeyToes at 6:13 AM on October 13, 2011

Where did the money go?

They burned it in their enormous incinerator.
posted by peeedro at 6:20 AM on October 13, 2011

There's also a debate over whether the city council even has the right to file for bankruptcy. And the bankruptcy is mainly because the city council thinks the mayor's austerity plan will fail and this is an easier way out.

Where did the money go?

NY Times article from 2010. They borrowed money to rehab an incinerator thinking they would make money, but the rehab cost way more than expected, plus there wasn't much of a market for it. A case of a municipality thinking they are a business (that way they don't have to raise taxes!) and ending up failing like a business.
posted by smackfu at 6:20 AM on October 13, 2011 [14 favorites]

The most shocking thing about this story to me is that Central Falls held out long enough to be the second city to declare bankruptcy.
posted by Bulgaroktonos at 6:22 AM on October 13, 2011 [1 favorite]

But but Meredith Whitney told me there were going to be Hundreds of Bankruptcies

(Also Harrisburg should probably take a look at the contract they signed with Assured Guaranty - no bankruptcy, AGO basically controls that asset and all of its cashflows now. They don't have an interest in giving concessions to Harrisburg, because they are on the hook for the full amount no matter what)
posted by JPD at 6:33 AM on October 13, 2011

I guess you could say...
their budget...
went up in smoke.
[glasses]
Yeeeeeaaaaahhhh!!!
posted by Threeway Handshake at 6:39 AM on October 13, 2011 [7 favorites]

Topeka decided to repeal a domestic violence law as part of an effort to end job killing government regulations and save taxpayer money.
posted by Pogo_Fuzzybutt at 6:47 AM on October 13, 2011 [3 favorites]

Back in June, on the brink of economic disaster, Harrisburg, Pennsylvania mayor Linda Thompson unveiled her brilliant plan to rescue the city:

Thompson and a host of other religious leaders are about to embark on a three-day fast and prayer campaign to cure the city’s daunting money woes. ... “Things that are above and beyond my control, I need God,” Thompson told WHTM TV, the region’s ABC news affiliate. “I depend on Him for guidance. Spiritual guidance. That’s why it’s really no struggle for me to join this fast and prayer.”

posted by Trurl at 6:56 AM on October 13, 2011

This is going to be a huge surprise to people who didn't know that neither Philadelphia nor Pittsburgh is Pennsylvania's capital city.

And I am honestly and truly shocked to find myself to be one of them. (And I should know better, because I deal with "wait, so New York City's NOT the capital of New York?" questions myself.)
posted by EmpressCallipygos at 7:00 AM on October 13, 2011 [1 favorite]

Topeka decided to repeal a domestic violence law as part of an effort to end job killing government regulations and save taxpayer money.

Probably a derail, but:

Topeka repealed their law to compel the county to continue funding prosecutions, and was successful. The county DA, due to budget issues, forced all related costs onto the city, which it was not able to bear, either.

I didn't hear anything about "job-killing regulations" or other right-wing talking points in the better coverage of this mess. Everyone involved seems to be trying hard to do their jobs well under appalling circumstances.
posted by ryanshepard at 7:02 AM on October 13, 2011 [4 favorites]

Topeka decided to repeal a domestic violence law as part of an effort to end job killing government regulations and save taxpayer money.

I read some stuff about that yesterday, and your language about "job killing government regulations" is a huge misstatement what's going on in Topeka. Previously, the city had a local law against domestic violence, in addition to the state laws against it. The local District Attorney started refusing to prosecute misdemeanor domestic violence cases, forcing the costs on to the city. The city repealed the law so that now they can't prosecute them, which will hopefully force the District Attorney to do his job and prosecute all violations of state law. Nonsense about "job killing regulations" isn't presenting the actual story at all.
posted by Bulgaroktonos at 7:06 AM on October 13, 2011 [5 favorites]

I attended college in Pennsylvania for four years, and I didn't know that Harrisburg was the capital. Whatever; it's not even a real state anyway.
posted by Faint of Butt at 7:08 AM on October 13, 2011

But but Meredith Whitney told me there were going to be Hundreds of Bankruptcies

I'm not sure I understand your sarcasm here... Are you suggesting that the revenue picture for municipalities isn't terrible? or that local government hasn't taken on a lot of debt instead of raising taxes (some places more than others)?

There are a lot of structural, legal, and cultural impediments to municipal default. It's one of those nice little hidden subsidies to Wall Street like student loans. If it were easy to default I'm sure we would see a lot more. Whitney may have been hyping bullshit but the underlying picture for local government is pretty fucking bleak.

And now, of course we have Obama and friends pushing infrastructure privatization via the "infrastructure bank":

Senate Resolution 652, sponsored by Senator Kerry of Massachusetts, would create the American Infrastructure Financing Authority. The AIFA would require that funded projects generate revenues to repay the loan to the infrastructure bank. For the Minneapolis bridge project to be funded it would have needed to be a toll bridge rather than a free bridge (or have a government entity repay the loan). It’s a PayGo Infrastructure Bank.

So, now private development interests can get government backed financing directly.
posted by ennui.bz at 7:11 AM on October 13, 2011 [3 favorites]

My sarcasm is that Meredith Whitney basically knows as much about the municipality bankruptcy process as the stuffed parrot sitting on my desk, not that municipalities aren't under significant economic stress.
posted by JPD at 7:15 AM on October 13, 2011

I didn't hear anything about "job-killing regulations" or other right-wing talking points in the better coverage of this mess.

That was my sarcastic hyperbole.

That said, the basic idea that a town that had passed a law regulating conduct has now found it too expensive to continue enforcing has a strong analog in GOP efforts to gut things like the EPA.

It's problematic on a few levels, IMO.
posted by Pogo_Fuzzybutt at 7:17 AM on October 13, 2011 [2 favorites]

ryanshepard: "Topeka decided to repeal a domestic violence law as part of an effort to end job killing government regulations and save taxpayer money.

Probably a derail, but:

...

I didn't hear anything about "job-killing regulations" or other right-wing talking points in the better coverage of this mess. Everyone involved seems to be trying hard to do their jobs well under appalling circumstances."

No, they aren't. It's called raising fucking taxes to pay for the protection of your citizens. Period. Anything else is bullshit.
posted by symbioid at 7:30 AM on October 13, 2011 [1 favorite]

I guess you could say...
their budget...
went up in smoke.
[glasses]
Yeeeeeaaaaahhhh!!!

I appreciate your effort, and this is a good exemplar of the joke template, but if you really want to go the extra mile:

1.) Capitalize the YEEEEEEAAAAAAHHHHHH!!!!!!

2.) Use the following emoticon set to punctuate your joke:

( ಠ_ಠ)
( ಠ_ಠ)╯-■-■
(-■_■)


Brought to you by the Council for a Better YEEEAAAAAHHHH!!!!
posted by adamdschneider at 7:37 AM on October 13, 2011 [21 favorites]

Apparently Topeka is the capitol of Pennsylvania. Who knew??
posted by spicynuts at 7:45 AM on October 13, 2011 [1 favorite]

No, they aren't. It's called raising fucking taxes to pay for the protection of your citizens. Period. Anything else is bullshit.

The Shawnee Co. DA isn't in a position to raise taxes, and the city has raised several taxes in recent years (and are dependent, in some cases, on voter approval to do so, in any case.) The crisis here is being caused by county-level cuts that no one directly charged w/enforcing the law appears to have any direct influence over.
posted by ryanshepard at 7:51 AM on October 13, 2011 [3 favorites]

Well, a midsized city just went bankrupt. This is your chance, Obama, to bail out Main Street like Sarah Palin kind of said you should do in that weird interview with Katie Couric. I am certain this will win over the tea party, maybe.
posted by mccarty.tim at 7:52 AM on October 13, 2011

Well, a midsized city just went bankrupt. This is your chance, Obama, to bail out Main Street like Sarah Palin kind of said you should do in that weird interview with Katie Couric. I am certain this will win over the tea party, maybe.

FEDERAL GOVERNMENT IS TAKING OVER MAIN STREET! SOCIALISM! FACISM! ISM ISM ISM! OBAMA BAD GRAHHHHHHHHHH!
posted by Talez at 8:02 AM on October 13, 2011

Meredith Whitney basically knows as much about the municipality bankruptcy process as the stuffed parrot sitting on my desk

Really?

"What Meredith Whitney was trying to say was more interesting than what she was accused of saying. She didn’t actually care all that much about the municipal-bond market, or how many cities were likely to go bankrupt. The municipal-bond market was a dreary backwater. As she put it, “Who cares about the stinking muni-bond market?” The only reason she had stumbled into that market was that she had come to view the U.S. national economy as a collection of regional economies. To understand the regional economies, she had to understand how state and local governments were likely to behave, and to understand this she needed to understand their finances. Thus she had spent two unlikely years researching state and local finance."

posted by yerfatma at 8:08 AM on October 13, 2011

yes really
posted by JPD at 8:10 AM on October 13, 2011

Michael Lewis knows less than the soon-to-be-eaten apple sitting next to my stuffed Parrot.
posted by JPD at 8:11 AM on October 13, 2011

JPD: My sarcasm is that Meredith Whitney basically knows as much about the municipality bankruptcy process as the stuffed parrot sitting on my desk, not that municipalities aren't under significant economic stress.

You have a stuffed parrot and it's not your profile picture?
posted by These Premises Are Alarmed at 8:34 AM on October 13, 2011 [3 favorites]

Michael Lewis knows less than the soon-to-be-eaten apple sitting next to my stuffed Parrot.

You've moved the goalposts a bit there: what happened to Whitney knowing nothing in spite of her claimed two years of research?
posted by yerfatma at 9:45 AM on October 13, 2011

read my previous quote. I stand by my comment. How has anything she has predicted remotely come true. Then I ask you to do some reading on how the municipal bankruptcy process actually works from a mechanical & legal perspective and then come back here and tell me she knows what she is talking about.

You should read this https://self-evident.org/?p=877 and her follow on piece.

(you could read this as well about my apple vs. Michael Lewis. BTW it was delicious.)

The other thing to keep in mind is that as you can see, the Harrisburg Incinerator has been troubled for years. This is not new news.
posted by JPD at 9:59 AM on October 13, 2011 [1 favorite]

The other thing to keep in mind is that as you can see, the Harrisburg Incinerator has been troubled for years. This is not new news.

The story sounds similar to the Birmingham waste treatment plant: an unholy combination third-world-style corruption and incompetence and financial sharkery i.e. a mini-version of developing nations loans of the 70's, right here at home. surely, there are more of these bad deals floating around.

actually, the whole '"financial analyst" sells bullshit' story i.e. Whitney isn't really news either. If you bet money in the muni-bond market based on Lewis or Whitney you deserve to lose it. but, as i said before, the story isn't about what's happening at your local dog track:

Did other governments make generous commitments during periods of economic prosperity? Sure, it is almost impossible for political officials not to do this kind of thing. But are other governments pushing themselves to the brink by not addressing this issue? Lewis’ audience wouldn’t know, because he did not interview the mayors of any of the two-thirds of the 296 California municipalities (as surveyed by the League of California Cities) that are in the process of renegotiating changes to their retiree benefits plans. I suspect if Lewis had, he would have discovered that other cities have internalized Vallejo’s situation.

You can sit back and watch government retirees and employees get squeezed to make the bond market happy (and because structural/legal factors make default/bankruptcy hard for municipalities so what else can you do?) Like the whole "peak oil" issue, any sufficiently accurate analysis is a printing press for money, so any analysis you read is likely to be not sufficiently accurate (as I hear it, technical analysis of the bond market is an order of magnitude more sophisticated than that used for options), but overall you can look at the way municpalities borrowed money in the good times (to forestall tax increases that weren't sustainable driven by structural factors in the costs of government i.e. the Reagan revolution) and say roughly, there's a lot of "bad debt" out there that can't be discharged and deleveraging is occurring by sucking money out of people's pockets and into investor pockets. A smaller version of the big story.
posted by ennui.bz at 10:45 AM on October 13, 2011 [1 favorite]

Unfortunate as this may be, it's also a very good opportunity for communities to re-evaluate exactly what services they need versus what services they *want*. It's also a good way to get people to realize that there ain't no such thing as a free lunch: if you want 24/7 police and fire protection, you're going to have to pay for it, kiddies. There's no magic unicorn that craps money to pay for these things. Either pony up, or deal with the decline in services.

My community has been going through similar discussions because the city council wanted to raise taxes after paying a ludicrous amount of money to eminent-domain a shopping center that has been vacant since 2006. When they decided they wanted to then deploy "municipal wireless" the town about lopped off the heads' of the council members.

Too many communities have made too many poorly thought out decisions in the past twenty years and the bills are now coming due. Sure, everyone would like a new athletic center and senior center; Everyone wants perfectly paved and plowed roads, everyone wants complete safety and security - but that all comes at a cost, and its a cost that an increasing number of people are either unwilling or unable to pay.
posted by tgrundke at 10:45 AM on October 13, 2011

Too many communities have made too many poorly thought out decisions in the past twenty years and the bills are now coming due. Sure, everyone would like a new athletic center and senior center; Everyone wants perfectly paved and plowed roads, everyone wants complete safety and security - but that all comes at a cost, and its a cost that an increasing number of people are either unwilling or unable to pay.

Sorry, this is kind of bullshit. Underlying any bad decisions that may have been made is the aftermath of the "Reagan revolution" i.e. a structural decline in federal government expenditures at the local level. This has left local governments trying to fund unfunded federal government mandates in education, law enforcement and the environment (i.e. water treatment). Add onto that the relentless inflation of the health insurance market and you have a situation where communities face yearly structural increases in costs and no new source of revenue. This also drives a lot of "entrepreneurial" risks taken by local governments desperate for revenue.

The roots of the collapse on the 'demand' side of the US economy go deeper than just the bubbles of the last 20 years.
posted by ennui.bz at 10:54 AM on October 13, 2011

ennui.bz -

No, it's not bullshit, it's a reality that municipalities have to face. My community leaders told us: well, over the past five years we've had to pick up more of the tab that the county and state won't.

My answer was: well, if you've seen this trend coming, why haven't you done more to plan for it, instead of spending $20 million on a shopping center (at the top of a market) and increasing staffing numbers and staff salaries by 70% since 2005?

You're right- there are more things that communities have to pay for and everything has become massively more expensive, but I think that too many communities have lived too long in the realm where a simple tax/fee increase fixed the problem until the next time. Well, we're at "the next time" and the citizens are finally starting to say "no".

It's a very good opportunity for local communities to have serious dialogues about what is most important to them, how to most efficiently provide those services and to what extent the local taxpayers are willing to open their wallets.

The money has to come from somewhere - local taxes, state taxes or federal taxes. Leave it up to the local community to determine what it does and does not wish to pay for. And you are correct - unfunded federal mandates are doing a great deal of harm to local and state communities.
posted by tgrundke at 10:59 AM on October 13, 2011 [1 favorite]

You're right- there are more things that communities have to pay for and everything has become massively more expensive, but I think that too many communities have lived too long in the realm where a simple tax/fee increase fixed the problem until the next time. Well, we're at "the next time" and the citizens are finally starting to say "no".

It's a very good opportunity for local communities to have serious dialogues about what is most important to them, how to most efficiently provide those services and to what extent the local taxpayers are willing to open their wallets.

Come on. If you look at the numbers there are real, yearly increases in structural costs that cannot be covered by ordinary revenue. Full stop. Yes, local officials make bone-headed deals but you are peddling a version of the 'coddled government employees' and fancy social services are stealing your tax money story, which is bullshit.

What are seniors supposed to do? Rot at home waiting for neighbors to notice the smell? Or how about what a local town here is proposing: no on-duty police officers at night? Federal mandates are all that is preventing shit, literally, from being dumped into the rivers, 'special' kids onto the street, and poor people into tents at the outskirts of town. The problem can only be solved on your terms by rolling back the federal government to the "utopia" of the gilded age and watching the environmental, economic, and social catastrophes of the late 19th and early 20th centuries repeat themselves.
posted by ennui.bz at 11:08 AM on October 13, 2011 [1 favorite]

Yes, local officials make bone-headed deals but you are peddling a version of the 'coddled government employees' and fancy social services are stealing your tax money story, which is bullshit

I'm not peddling anything, ennui.bz, merely stating the headwinds: there's a need for additional revenue and local residents are not willing to open up their pockets for it. It's a problem, no question, but the bigger problem is getting the citizenry onboard and willing to pay for these services. In many cases, the local citizens simply cannot afford the burden.

I don't disagree with your points - but we have hit a point where the cost to provide many of these services is outstripping the capability and willingness of people to pay. Again - I'm talking about on a local level, not national. If the locals can't pay and we push the bill up to the state and then up to the federal level, then it's someone else paying the tab and pulling the strings. But ultimately, at the end of the day, someone has to pay. Nothing is free.
posted by tgrundke at 11:22 AM on October 13, 2011 [2 favorites]

This is going to be a huge surprise to people who didn't know that neither Philadelphia nor Pittsburgh is Pennsylvania's capital city.

Actually, being Pennsylvania's capital city completely sucks for Harrisburg. Historically, very little industry has ever gotten a chance to develop in the city, because all the state government buildings have basically crowded it out. In addition, because so many buildings in the city are state, municipal, or government buildings, the local government has a much smaller tax base than cities with more businesses. The amount of commerce in the city goes way down after 5PM (although the nightlife has gotten better in recent years), because most of the people who work in Harrisburg don't live in Harrisburg. The city is also predominantly black and Democratic, which means that the Republican governor and legislature are just drooling to kick the city when it's down. Add on top of this the Harrisburg suburbs on the West Shore (aka the White Shore), which have only recently stopped adhering to the "gentlemen's agreement" among local realtors to keep blacks from moving west of the Susquehanna River, and it's all just one big mountain of suck.
posted by jonp72 at 6:04 PM on October 13, 2011