Regional News

Harrisburg Receiver Weighs Sale, Lease of City Assets

When the Pennsylvania Economic Development Authority issued $107 million of debt in January to bail out defaulted bonds in connection with the 10-story Forum Place office building in Harrisburg, critics called it another incinerator-type fiasco in Pennsylvania’s capital city.

But those same critics said the Forum Place transaction, in which the state bought the building from the Dauphin County General Authority, could serve as a model for outside-the-box thinking as Harrisburg, now under receivership, looks to wriggle free of $310 million of bond debt related to an incinerator retrofit project.

Forum Place was one of several talking points among opponents to receiver David Unkovic’s proposed financial recovery plan for Harrisburg, about which he testified Thursday before Judge Bonnie Brigance Leadbetter of the Commonwealth Court of Pennsylvania.

Unkovic has begun a request for proposals process for the sale or lease of the incinerator and the city’s revenue-producing garages.

Unkovic said Thursday he is reserving the right to pursue any legal claims against parties involved in the buildup of the city’s incinerator debt, but valuing city assets is an immediate priority.

The biggest creditor is incinerator bond insurer Assured Guaranty Municipal Corp. Harrisburg has skipped about $65 million of incinerator bond payments, according to court documents.

City Controller Dan Miller and others, who were expected to cross-examine Unkovic on Thursday afternoon, feel the sales could leave the city with few assets.

“My point is this: Let Unkovic make the best deal he can, but if the state can provide $100 million for Forum Place, can’t they loan us $200 million? We could keep our assets. Nothing we’d have to sell,” Miller said in an interview. “With interest rates at historic lows, we could refinance.”

Miller said even if the city sells its assets, it still must deal with a $15 million structural deficit. And after assets are sold, the city would be left with little for basic services. He also has warned that Harrisburg’s debt could reach about $450 million, including the potential $40 million of guaranteed and unfunded debt coming due beginning in 2016 for bonds related to the Strawberry Square downtown mall.

The city is the guarantor of those bonds, issued by the Harrisburg Redevelopment Authority, as it is on the incinerator bonds issued by the Harrisburg Authority, which operates the trash burner.

Miller, City Council President Wanda Williams and Treasurer John Campbell formally objected to Unkovic’s plan in a brief filed by attorney Mark Schwartz.

Schwartz represented the City Council in its Chapter 9 bankruptcy filing, which a federal judge nullified in November. That ruling is under appeal.

Schwartz called the Forum Place deal “very recent precedent,” adding: “There is no indication that the receiver has pursued similar initiatives with the commonwealth to benefit the city of Harrisburg.”

Mayor Linda Thompson, meanwhile, favors Unkovic’s plan. The Commonwealth Court must sign off on it by April 6, two months after his submittal.

“I want that plan implemented as soon as possible,” Thompson said. “Since this plan’s process began, last June, the city has incurred approximately $10 million in additional debt and costs and fees related to incinerator debt. Further delay in implementing a financial recovery plan is simply unacceptable to the city and the region.”

Last year, the City Council three times rejected a proposed workout under the state’s Act 47 program for distressed communities, prompting the Pennsylvania legislature to pass a law restricting bankruptcy options and enabling Gov. Tom Corbett to declare a state of fiscal emergency for the 49,000-population city.

Unkovic could file for bankruptcy on behalf of Harrisburg on July 1, when the restriction expires.

William Cluck, a local attorney and a Harrisburg Authority board member, called Unkovic’s insistence on refilling the chief operating officer’s position — someone the mayor could not fire — the most important part of the newest plan.

Cluck, speaking at a downtown public forum, said under-the-radar proposals such as city website improvements are a plus. “One of the biggest problems with city government is a complete lack of transparency. Our city website … frankly, a second grader could do a better job,” he said.



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