13 Oct 2011

Pennsylvania state capital files for bankruptcy

1:15 pm on 13 October 2011

The American city of Harrisburg - capital of the populous state of Pennsylvania - has filed for bankruptcy, making it the first state capital to do so.

With debts totalling $US 300 million, Harrisburg has struggled to pay for services, the BBC reports.

The city council voted 4-3 on Wednesday to file for bankruptcy under a rarely used code for towns and cities.

Debt woes have plagued the city of 50,000 since 2010, when an incinerator project funded by municipal bonds failed to raise expected cash.

The move comes as the state legislature considers a takeover of the city and the implementation of a rescue plan under the state's programme for distressed cities.

Such a plan would include renegotiating the city's labour deals, cutting jobs and putting its most valuable assets up for sale or lease.

Last year, municipal bond analysts expected many bankruptcies from US cities under debt pressure, but few localities have actually taken the step.