By Mark Shade
HARRISBURG, Penn (Reuters) - A day after Pennsylvania's governor declared a fiscal emergency for Harrisburg, the city's mayor said she would try to work with a divided city council and creditors to design a recovery plan to avoid a state takeover.
Harrisburg, a city of about 50,000 and the state capital, is struggling to pay for essential services while also facing about $300 million in debt linked to a revamp of its incinerator.
The city council filed for bankruptcy this month over the objections of Mayor Linda Thompson, and Pennsylvania Governor Tom Corbett signed legislation last week allowing him to declare the fiscal emergency as a step toward a takeover.
At a news conference on Tuesday, Thompson said she would request that the city's major creditors help devise a plan that would keep Harrisburg away from state control.
"I will be using diplomacy," she said.
Harrisburg is one of a handful of U.S. cities that has faced fiscal collapse. Vallejo, California filed for bankruptcy in 2008, and Rhode Island's tiny city of Central Falls went bankrupt earlier this year.
Still, municipal bankruptcies remain rare. Corbett, who had opposed the Harrisburg bankruptcy filing, has said the city would have been better off if it agreed to a rescue plan under the state's Act 47 program for distressed cities -- which has seen Philadelphia and other cities through crises.
The Harrisburg city council has rejected several recovery plans. In July, it rejected a state-approved rescue plan that called on the city to renegotiate labor deals, cut jobs, and sell or lease the city's major assets -- its parking garages and the incinerator. In August, the council rejected a similar plan put forward by the mayor.
On Tuesday, Thompson called on the city council to come up with more ideas ahead of a public meeting set for October 31 to begin the process of developing a recovery strategy.
"I want them to contribute their best thinking," she said.
(Editing by Edith Honan, Ellen Wulfhorst and Cynthia Johnston)