(Reuters) - Pennsylvania's distressed capital city, Harrisburg, will skip $5.3 million of debt payments due next week, the first time the city has defaulted on its general obligation bonds, to ensure there is enough cash to fund vital services. 

Pennsylvania's capital of 50,000 people is mired in $326 million of debt due to the expensive retrofits and repairs of its troubled trash incinerator.

 

"Although this default on general obligation bonds is unfortunate, I don't think it's going to hold up the process for proceeding under the recovery plan," Receiver David Unkovic said.

 

The state tapped Unkovic to serve as receiver, and he devised a recovery plan that includes the proposed sale or lease of the city's major assets, including parking garages and the incinerator itself.

 

Commonwealth Court President Judge Bonnie Leadbetter on Friday approved the plan, noting that it may change with more investigation from the receiver.