1. MEMORANDUM
October 14, 2011
FR: Bob DeSousa
TO: Sen.Pat Toomey
CC: ChristopherGahan,Joe Sterns
RE: Harrisburg Bankruptcy
 In the 1970s, the Cityof Harrisburg builtagarbage incinerator. The incineratorrequiredseveral retrofits
overthe years, and by February2009, the city owed $308 million. Thatyear,the HarrisburgAuthority
(which operatesthe city’sgarbage-disposal andwatersystems) beganmissingdebt-service payments.
DauphinCountyloanedthe citymoneytomake paymentsin2002-3 and 2009.
 In the 2009 Democraticprimaryelection,CityCouncil PresidentLindaThompsondefeatedMayor
StephenReed,whichwasamajorpolitical upset. ThompsonandReedhadfrequentlydisagreedwith
each other,andThompsonarguedthat Reedwas toosecretive andauthoritarianandignoredthe
concernsof outlyingneighborhoods. Thompson(like 52% of the city’spopulation) isAfrican-American.
The incineratordebtwasan issue inthe election,butnotadecisive one.
 LindaThompson wonthe general election andassumedoffice asmayorinJanuary2010. She initially
discussed sellingcityassetsandrequesting increasedtippingfees fromDauphinCounty forsending
trash to the incinerator,butdidnotsubmita formal proposal. Gov.Ed Rendell urgedthe city toholdoff
on seekingdistressedstatusunderAct47. CityCouncil demandedthatanysalesof cityassetshave a
thirty-yearlimitandthatan auditbe conductedbefore anysale occurred.
 Mayor Thompson’sadministrationbegansufferingfromaccusations of secrecy,highturnoveramong
keystaff members,andaninabilitytoworkwithCityCouncil,whichturnedpublicopinionagainsther.
In February2011, a rallywas heldoutside cityhall demandingherresignation,whichshe wavedatfrom
herwindow.
 In August2010, Harrisburg missedforwardingapaymenttoward$35 millionindebtthatcame due in
December. Thatfall,shareholdersinthe city’sdebtsuedthe citytoforce paymentsandMayor
Thompsonsoughtdistressed-citystatusunderAct47, whichwas grantedinDecember. Inaddition,the
citybeganhavingtrouble makingpayroll forcityworkers. DauphinCountycommissionerseventually
arrangeda loanto coverthe payment,butsuedinFebruary2011 to getthe moneyback.
 Lancaster County’swaste managementauthorityandNew York-basedinvestorJacobFrydmanboth
offeredtobuythe incineratorinMay 2011, butthe city didnot act on the offers.
 Some membersof Harrisburg’scitycouncil beganproposingacommutertax or a countywide salestax
increase topay forthe incineratordebt. State Sen.Jeff Piccola(R-DauphinCo.) proposedstate bills
preventingacommutertax andprovidingfora state takeoverif the citydoesnot adopt the Act 47 plan,
and the countycommissionersrejectedimposingasalestax.
 The Act 47 planwasreleasedinJune 2011. It recommendedsellingthe incinerator,parkinggarages,
and otherassets,layingoff 19 employees,andstreamliningcityservices. CityCouncilvoteditdownin
July. Mayor Thompsonproposedaplanthat was similartothe Act 47 plan,exceptthatitwouldimpose
a commutertax if the county,state,and bondinsurersdidn’tagree tocover$26 millionof stranded
debt. Thisplanwas rejectedaswell.
 Currently,abill toallowa state takeoverof the cityof Harrisburgisadvancinginthe General Assembly
and expectedtobe enactedintolaw. CityCouncil,overthe objectionof MayorThompson,votedtofile
for bankruptcyonOctober11, 2011.