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City Council of Bankrupt Harrisburg, Pa., Opposes Mayor's Request for Court Approval to Pay City Vendors

The city council of Harrisburg, Pa., recently opposed the request of the bankrupt capital city's mayor, Linda Thompson, to make payment to city vendors. Because the municipality is under bankruptcy protection at this time, Mayor Thompson had to make a request to the bankruptcy court for approval to pay the city suppliers. The city council, in response, filed an opposition to the mayor's request. The council believed the payments unnecessary, according to its filed opposition.

Background Facts and History in the Harrisburg Bankruptcy

The Harrisburg City Council is comprised of a majority of members who support the decision to file for bankruptcy protection. Despite its support for bankruptcy protection and agreement to complete the bankruptcy process, the council sought judicial approval from The Honorable Mary D. France, its assigned judge in the United States Bankruptcy Court for the Middle District of Pennsylvania, Harrisburg Division, to deny the mayor's request to allow Harrisburg to pay ordinary, routine obligations. According to the council, the Harrisburg city controller has not struggled in any way, even after the bankruptcy filing, to pay vendors in the ordinary course. The council even included that assertion in its papers filed with the bankruptcy court by counsel Mark D. Schwartz.

According to Schwartz, the mayor's motion for approval to make the vendor payments is not a substantive filing with any meat. Instead, according to the bankruptcy counsel, Mayor Thompson's motion is strategically rooted. Incidentally, requests such as that of the mayor are fairly routine in bankruptcy proceedings. As such, these types of requests are usually granted by the court, especially in cases when there is no opposition.

Mayor Thompson's Position on the City's Bankruptcy and Vendor Payments

Mayor Thompson, Pennsylvania state officials, and officials for Dauphin County apparently oppose the bankruptcy of Harrisburg. Bankruptcy Judge Mary France scheduled a hearing for Nov. 23, 2011, to ascertain whether the bankruptcy case should be dismissed. Judge France's decision to schedule that hearing was based in part on the objections of these interested parties and their requests for a case dismissal.

Mayor Thompson filed her request for authority to pay city vendors at the end of October 2011. Purportedly, her rationale for making the payment request was that some city suppliers were concerned about accepting payments from Harrisburg without bankruptcy court approval of the city's authority to pay them as a debtor in bankruptcy. The vendors are worried about preferential transfers that may later be avoided, or undone, in bankruptcy.