Harrisburg, Pennsylvania, Council Told to Consider Bankruptcy

http://www.bloomberg.com/apps/news?pid=20601109&sid=ab6OQc35weDI&pos=14

Harrisburg politicians are seriously considering bankruptcy as a way of getting around paying Covanta Holding Corp (a New Jersey based company) for an incinerator. The Pennsylvania state government has already missed hundreds of thousands of interest payments on bonds which is rather indicative of both the state government and the individuals who are part of it. If Washington and Harrisburg are to expect American citizens to be fiscally responsible, why shouldn't we expect the same from them? If Harrisburg does file for Chapter 9 Bankruptcy, the responsibility to pay will be transferred to the bond's insurer, a Bermuda based company called Assured Guaranty Municipal Corp. Unlike Chapter 7 and Chapter 11 bankruptcy, Chapter 9 bankruptcy is only available to Municipalities. There may be more Chapter 9 bankruptcy filings as the recession and poor management of funds by local municipalities may become more common during this financial bloodletting. Politicians say that their constituents cannot afford a tax increase given the economic climate. If Harrisburg does file for bankruptcy, it will hurt the city's ability to get financing for future projects which will hurt taxpayers for years, or even decades to come.