Judge also orders 1 percent income tax hike.
The City of Harrisburg, Pa., was ordered by a Pennsylvania judge on Aug. 27, to suspend debt service payments on its incinerator and to implement a 1 percent tax hike, according to a report from Reuters.
William Lynch, an attorney for Harrisburg's state-appointed receiver, reportedly said during a court hearing that the city would be $500,000 in the hole if it made a $3.4 million debt service payment due in September.
Commonwealth Court Judge Bonnie Leadbetter ruled that the city should not make any further debt payments until further notice on its Waste to Energy (WTE) facility, which the Reuters report says contributed to the city’s $320 million debt.
Leadbetter also ordered the city council to enact a 1 percent hike on residents' earned income within 15 days. The increase, which city council members have opposed, is temporary but effective immediately upon implementation, for at least one year. Revenue generated from the tax hike is only to be used to fund essential city services.
Harrisburg has been struggling with a significant budget shortage and its City Council and the city's financial officers are seeking Chapter 9 bankruptcy protection so they can reduce payments to bondholders.