The government drones that run Pennsylvania’s state capital have thrown in the towel in an effort to wipe away the results of their incompetence and complete lack of financial acumen. In classic drone fashion, the council has called for a new 1% county tax to help pay off the remaining debt. A drone solution is always to screw the people for their mistakes.
I’ve read many stories taking shots at Meredith Whitney for her prediction of municipal defaults. The idiots doing a touchdown dance like Terrell Owens are celebrating prematurely. The fiscal condition of cities across the country are deteriorating rapidly. Ben Bernanke is contributing greatly to their woes with his zero interest rates. The pension obligations of these cities become worse by the day. If you are a government worker with a pension, I’d suggest you start saving now. You will not be getting that big fat pension they promised you. So Solly.
Meredith Whitney was early with her prediction, but as with those who saw the mortgage collapse two or three years before it happened (Eismann, Burry), she will be right.
Harrisburg, Pennsylvania, Files for Bankruptcy, Lawyer Says
October 12, 2011, 2:11 AM EDT
Oct. 12 (Bloomberg) — The city of Harrisburg, Pennsylvania, facing a state takeover of its finances, filed for bankruptcy protection following a vote by City Council, according to a lawyer for the council.
Mark D. Schwartz, a Bryn Mawr, Pennsylvania-based lawyer and former head of municipal bonds for Prudential Financial Inc.’s mid-Atlantic region, said he filed the documents by fax to a federal bankruptcy court last night. The filing couldn’t be confirmed with the U.S. Bankruptcy Court in Harrisburg.
The state capital of 49,500 faces a debt burden five times its general-fund budget because of an overhaul and expansion of a trash-to-energy incinerator that doesn’t generate enough revenue.
“This was a last resort,” Schwartz said in an interview after the council voted 4-3 to seek bankruptcy protection. “They’re at their wits end.”
While bankruptcy would mean the loss of state aid under a law passed in June, it’s preferable to a proposed recovery plan, said Councilwoman Susan Brown-Wilson.
“We’re not incompetent,” Brown-Wilson said. “We’re just not going to let you run us over with the train anymore,” she said, referring to state officials.
Jason Hess, the acting city attorney, told the council members before the vote that they didn’t follow procedure and their action wouldn’t be binding. The members went ahead anyway.
Preparing for bankruptcy is going to mire the city in litigation it can’t afford, said Councilwoman Patty Kim, who voted against it.
‘Don’t Have Money’
“The problem still exists that we still don’t have money, and we still haven’t moved one foot forward,” Kim said.
Harrisburg, the seat of Dauphin County, needs $310 million to make bond payments, restructure debt and repay the county and insurer Assured Guaranty Municipal Corp., which made payments the city skipped on the waste-to-energy facility. Schwartz said he expects Assured Guaranty will reduce the value of its debt.
“Why should they be first in line?” he said.
In an opinion article published yesterday in a local newspaper, the Patriot-News, the four council members who voted for bankruptcy said Assured Guaranty and bondholders should forgive at least $100 million of the debt.
They also said there should be a countywide sales tax of 1 percent to help pay off the debt. Schwartz, in the interview, said that could forestall asset sales.
Assets, Debt
In a copy of the Chapter 9 petition provided by Schwartz, the city lists both assets and debt of $100 million to $500 million. According to the copy, the city has 49 or fewer creditors.
The Pennsylvania Senate is scheduled to take up legislation next week that would make Harrisburg the first municipality in the state to be placed in receivership.
The council in July and August rejected fiscal rescue blueprints from consultants hired by the state and Mayor Linda Thompson, triggering the legislative response.
The bill would let Republican Governor Tom Corbett declare a fiscal emergency in Harrisburg and name a receiver who would develop a recovery plan. The manager would be able to sell assets, hire advisers and suspend the authority of elected officials who interfere. Unlike in Michigan, the receiver wouldn’t be able to change union contracts.
jmarz says:
This will end up becoming a trend in the US. The next few years are going to be ugly.
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12th October 2011 at 10:01 am
Maddie's Mom says:
Harrisburg needed a Hurricane Hazel.
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12th October 2011 at 10:52 am
Hope@ZeroKelvin says:
Woah pony.
Hattisburg’s finanical problems seem to stem from just another one of these stupid green schemes, no? An incinerator-to-energy boondoogle?
Wonder whose brother-in-law got the contract?
So they want to, AGAIN, stiff AG and the bondholders? To whom the city IN GOOD FAITH sold their bonds in exchange for some kind of return??? Have these poeple forgive $100 million of the debt?
That amounts to THEFT, ahem, a redistribution of wealth, sorry, sorry, between AG/bondholders/the city of Hattisburg and the nitwits who sold the city this while elephant eco-insanity thing.
Hattisburg has a debt to asset ratio of FIVE, fuck it, FIVE. There is no way to recover from that, none,, without the restructing that occurs w/ bankruptcy.
Especially, and here is the crowning irony of this story, since UNION CONTRACTS CANNOT BE RENEGOTIATED.
As I said before: The Chuluthu Leviathan spawned by the incestuous mating of greedy corporations and a lawless fed.gov WILL be the death of us.
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12th October 2011 at 10:56 am
Don Murphy says:
Good and bad to go around in heaping helpings here I think. How long have we been bitching that the only alternative to collapse (a la hyperinflation) is some sort of debt repudiation? Well, now we are seeing the start of it. Yes, people are going to get shorn, screwed over and just take a good old fashioned skullfucking. It happens.
With this being the story of the hour perhaps people will realize that .gov jobs are not forever and that the tax base cant be treated like a $2 whore (no offense intended to $2 whores…). Smaller .gov is better, or at least less bad. Like the old GM commercial: do one thing, do it well. When people can see their .gov doing that they may actually start to support it again and think about…
Oh, what the hell do I know. It doesnt matter; it is still broken and cant be fixed. Let it fall.
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12th October 2011 at 11:18 am
AWD says:
Sounds good to me. Bondholders get screwed. The unions are going to get what they deserve, bankruptcy. It’s the only way to get gold-plated union concessions out of play. If the employees lose their pensions, tough shit, it serves them right for joining a union. The politicians and union leaders that bankrupted the states already have theirs anyway, fuck all the constituents and members. It’s not like they actually did anything productive or useful anyway.
And now state and local governments. Unions RIP.
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12th October 2011 at 11:47 am
Administrator says:
Capitol of Pennsylvania Files for Bankruptcy Protection
Mac Slavo
October 12th, 2011
SHTFplan.com
Back in December of 2010 we published a report in which well known bank and economic analyst Meredith Whitney warned of the coming debt defaults of local and state governments:
It has tenticles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the US economy.
In less than a year the Capitol of the State that once hosted the Constitutional Convention, Harrisburg, Pennsylvania, has become the first major government body to file for bankruptcy:
The city of Harrisburg, Pennsylvania, facing a state takeover of its finances, filed for bankruptcy protection following a vote by City Council, according to a lawyer for the council.
Mark D. Schwartz, a Bryn Mawr, Pennsylvania-based lawyer and former head of municipal bonds for Prudential Financial Inc.’s mid-Atlantic region, said he filed the documents by fax to a federal bankruptcy court last night. The filing couldn’t be confirmed with the U.S. Bankruptcy Court in Harrisburg.
The state capital of 49,500 faces a debt burden five times its general-fund budget because of an overhaul and expansion of a trash-to-energy incinerator that doesn’t generate enough revenue.
“This was a last resort,” Schwartz said in an interview after the council voted 4-3 to seek bankruptcy protection. “They’re at their wits end.”
…
In a copy of the Chapter 9 petition provided by Schwartz, the city lists both assets and debt of $100 million to $500 million. According to the copy, the city has 49 or fewer creditors.
The Pennsylvania Senate is scheduled to take up legislation next week that would make Harrisburg the first municipality in the state to be placed in receivership.
Source: Business Week
Most of the bond holders, just like those who held debt in the now government and union controlled General Motors, will be wiped out or forced to take reduced payments, which doesn’t bode well at all for the municipal bond markets. Zero Hedge weighs in:
And now that the precedent has been set (yes, Virginia, it can be done) watch as tens if not hundreds of other cash-strapped towns, cities, localities and other entities follow suit promptly to quite promptly.
…
And now, spin time.
For those who thought government jobs and pensions were safe from the economic contraction, think again. As cities and states face budgetary problems amounting to hundreds of billions of dollars, their only recourse will be to start cutting jobs and renegotiating pension commitments. Meredith Whitney had a gloomy forecast for this as well, claiming in June of 2010 that at least 2 million government jobs would be eliminated as city councils and state legislators are forced to tighten their belts.
Harrisburg is the first. It won’t be the last.
And, as we’ve opined previously, the States are soon to follow with their own debt problems. While the Federal government will likely step in with bailouts when we get to the State level, the real question that should be on everyone’s mind is, who will bail out the US government’s $150 trillion plus in future liabilities?
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12th October 2011 at 12:09 pm
TeresaE says:
“… If you are a government worker with a pension, I’d suggest you start saving now. You will not be getting that big fat pension they promised you. So Solly…”
hahahahahahaahahhaaaa
They can’t save, they are being asked to underfund their gold-plated medical plans! How dare you suggest that the illustrious workers be asked to understand fiscal impossibilities. They were “promised” and they will shut down ANY business that won’t cough up more $$$ to keep those promises. Well, the ones that aren’t being systematically slaughtered by lawsuits, OSHA, EPA, NLRB, DOJ, USDA, FDA and state agencies. Any left, well, you better pony up cause our promises can not be broken!
And my personal favorite is the lawyer, “…Schwartz said he expects Assured Guaranty will reduce the value of its debt.
“Why should they be first in line?” he said.”
Yes Attorney Schwartz, why the fuck should the company that made a BAD INVESTMENT be first in line? Indeed. Nope, they should be able to make 100% ROI, the unions should get 100% of promises, city freaking council should get pay raises for the stress.
And the little guys, the guys that pay for it all and get none of the profits and perks, they should pay.
This country is run by tools, counseled by tools and chock full of apathetic tools.
fiat on.
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12th October 2011 at 12:14 pm
AWD says:
Hey, TBP members:
Please help out ‘ol AWD here. The FDA is trying to regulate cigars. It would be a catastrophe, so please click on this link and help out all us guys that enjoy a cigar now and then before the Feds screw with our freedoms.
http://www.famous-smoke.com/fda/2/?emk=EMS1859&utm_source=SpeciaSale&utm_medium=email&utm_campaign=EMS1859&utm_content=button
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12th October 2011 at 12:32 pm
howie says:
This country is run by tools, counseled by tools and chock full of apathetic tools.
Awesome- the word tools could be replaced by almost anything and the message stays the same.
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12th October 2011 at 2:54 pm
ecliptix543 says:
Denada
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12th October 2011 at 5:09 pm
ecliptix543 says:
Hey… where did the previous post go?
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12th October 2011 at 5:11 pm
Novista says:
OK. IIRC, the definitive piece on Harrisburg was an early Matt Taibbi’s one in Rolling Stone magazine. I think, cannot confirm as their Archive is only accessible by subscription. [It could have been a piece in the Atlantic, but memory sez Rolling Stone.]
Anyhows, the takeaway factor was … [drum roll]
Goldman Sachs.
[ta dah!]
Yes, a murky tale of derivatives and innovative financial products by the vampire squid.
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12th October 2011 at 5:26 pm
Opinionated Bloviator says:
Meredith Whitney fact’s are correct, her timing was not. The United States is suffering systemic insolvency, every level of the government from city, to state to federal is bankrupt and CANNOT pay their debts.
Nothing matters until it does, then it matters ALOT… The United States is slowly approaching that threshold of everything mattering and it will happen all at once.
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12th October 2011 at 10:57 pm