Harrisburg, the capital of Pennsylvania, is set to default on general obligation bonds for the first time. The city of 49,500 is in receivership and the receiver is seeking approval to raise money by selling assets, raising taxes and fees and obtaining concessions from municipal labor unions. That has not yet come to pass, however, and $5.27 million in payments on two series of general obligation bonds is due on March 15. “The city will not be making these payments to ensure sufficient cash flow so the citizens of Harrisburg continue to receive essential services,” David Unkovic, the receiver, was quoted as saying. (“GOB-smacked: Harrisburg to default on general obligation bonds”).
The Harrisburg city council attempted to put the city into Chapter 9 bankruptcy, but its petition was dismissed on the grounds that it was not allowed to be filed under state law until July. The City is appealing.
Harrisburg owes more than $300 million ? five times its general fund budget. Ambac insures the city’s general obligation debt, and is expected to be claimed on next week, according to the article.