HARRISBURG, Pennsylvania - May 26, 2010 - The possibility of a bankruptcy filing by the city of Harrisburg, Pennsylvvania, the state capital, looms large these days - and it could be the first in a series, say some Wall Street traders.

Harrisburg, population 55,000, owes nearly $70 million in debt payments this year, and it's unclear where that money will come from.

Harrisburg now has one of the lowest credit ratings of any municipality in the United States.

Harrisburg Mayor Linda Thompson told CNBC Wednesday that she had assembled a group of bond stakeholders, the city council and other interested parties to work out the crisis "so that we don't become the poster child of the world in terms of bankruptcy."

Municipal bond underwriters are monitoring Harrisburg, which has struggled to contain the costs of financing a troubled incinerator project.

In 2003, the city borrowed $125 million to expand and retrofit its incinerator, which officials thought would make money for Harrisburg. The incinerator re-opened five years later, but it's turned out to be nothing but a money drain.

On May 1, the city missed a $452,282 loan payment related to the incinerator.

Raising taxes or selling assets, like real estate or parking lots, are options for Harrisburg. So is a restructuring plan - either inside or outside of bankruptcy.

If Harrisburg does file for bankruptcy, it would do so under Chapter 9 - which is employed by cities, but rarely. In one closely watched case, the city of Vallejo, Kalifornia has been in Chapter 9 since 2008.