Detroit Bankrupt: This Small City Could Teach Detroit How to Deal


Pennsylvania’s capital city’s economic misery all started with a trash incinerator 10 years ago.

The city built the structure under the impression that it would be able to fund itself in revenue, but instead the incinerator pushed the city down into a crater of $310 million in debt. The relatively small state capital of just over 500,000 has been in an uphill battle ever since to balance its budget, offering to sell the massive incinerator, leasing city parking lots to private companies, and driving up property taxes. The efforts were not enough, however, and eventually the city of Harrisburg, Pennsylvania filed municipal bankruptcy.

That was in 2011.

The thing is, unless you are either from Pennsylvania or particularly attentive to specific regional politics, you probably never heard this story. Compared to the Detroit bankruptcy scandal which has gone somewhat viral in Friday and Saturday's news clippings, at least, it got minimal hoopla. Why? Because it was dealt with within the state of Pennsylvania: There was no attempted reach-out to the feds, and the city of Detroit can probably learn from that.

In Harrisburg’s case, Mayor Linda Thompson was particularly hesitant to file her city under bankruptcy. She instead urged her city council to work with her and with the entire commonwealth to resolve the crisis by reaching into their distressed municipalities program (Act 47), which prompts a state consultant to create a recovery plan. Although the council members eventually voted 4-3 in favor of bankruptcy, the discussion was internal, and the $2.3 million stimulus package to revamp the city economy came from the state of Pennsylvania (the funding for which ironically probably came from the state’s fracking program, which is probably also a contributor to the city’s sinkhole dilemma and poor quality of life ratings — but that’s a whole separate issue to tackle).

Harrisburg, like Detroit, is in rough shape. Personal bankruptcy is tragic, and corporate bankruptcy is financially significant, and while Harrisburg's problems are on a far smaller scale than what one would find in the Motor City, Detroit should consider taking Harrisburg’s approach to its debt crises as a lesson and look more towards the Michigan state government than the federal government for support. Of course, dealing with cities that go bankrupt is completely different from dealing with companies that go bankrupt because one can, more or less, just shut down while the other, again for obvious reasons, cannot. So Detroit should really be looking at how other cities — New York, Harrisburg, Stockton — have dealt with their crises instead of companies like the Michigan-based Chrysler and GM. They should want to build infrastructure from within and stimulate job development before jumping to ask for federal aid, which will only land states in a further debt crisis. And they should avoid clogging up my out-of-state news headlines, too.