In one Pennsylvania city, plans to replace an aging trash incinerator left them flat broke.
On Tuesday, the Harrisburg City Council voted to 4-3 to file for Chapter 9 bankruptcy — a last ditch effort to write down nearly $300 million in debt incurred by a failed incinerator project, according to the New York Times.
The mayor of the capital city and state officials are now bitterly opposing that filing, which they say goes against state law.
But what seems to be missing in this debate is an important question — why did a city with an annual budget of $60 million ever approve going hundreds of millions into debt on a single project?
Eight years ago, Harrisburg officials approved issuing $125 million in municipal bonds to finance a the construction of a trash-to-energy incinerator, which they believed would be a money-maker for the city, according to a 2010 NY Times article.
Instead, the article details how the project became a growing money pit for the city, which facing delays and cost over-runs continued to funnel additional money into the project.
Now, the city’s debt stands at nearly $300 million.
That would be like someone who makes $100,000 a year owing $400,000 for a new home office they built in the hopes of making more money.
But the big difference is that if the homeowner fails, they’re the only one who has to deal with the consequences. When a municipality fails, that failure can affect every tax-paying citizen as well.
Prior to the bankruptcy battle, proposals to help fill the gaping debt have ranged from selling parkland to local developers to raising local tax rates.
But don’t worry, Harrisburg city officials promise that they know what they’re doing.
“We’re not incompetent,” Councilwoman Susan Brown-Wilson told Bloomberg Business Week.