Harrisburg’s receiver said Monday that recovery for Pennsylvania’s capital city starts with finding out how much cash upfront it can get for its assets.
David Unkovic,
Unkovic wants to close on the sale of the incinerator — and Harrisburg’s revenue-producing parking garages — by the end of June.
Failing that, Unkovic said he is prepared to file for Chapter 9 bankruptcy — a move the City Council tried unsuccessfully last fall. A provision restricting Harrisburg from filing for bankruptcy because of its status in a state program for distressed communities — commonly known as Act 47 — ends July 1.
“It’s an aggressive schedule, but we’ll shoot for it,” Unkovic said in an interview after he filed his report with the Commonwealth Court of Pennsylvania. He said his timetable was unrelated to the bankruptcy legislation.
Unkovic, the former chief counsel for the state Department of Community and Economic Development, ordered the Harrisburg Authority, which owns the trash burner, to issue a request for qualifications and proposals to determine interest in the incinerator and the garages, considered the city’s two most marketable assets.
He also wants the authority to undertake a similar process to find new companies to manage and operate water and wastewater assets.
Unkovic called for the city to hire a full-time chief operating officer, a vacant position in 2011. Unkovic, who would sign off on the hire, said such a person could be a “major contributor” to Harrisburg’s long-range planning.
“They really do need a chief of staff as soon as possible, and city officials are committed to that. That’s as important as anything else in the report,” he said in the interview.
He also urged the city to try to renegotiate labor contracts.
The plan also called for help from the city’s unions to close an annual structural deficit — the ongoing amount by which Harrisburg’s operating expenses consistently exceed its revenues — of $11 million.
“Closing this gap requires a combination of concessions from the labor unions, an increase in the earned income tax, service efficiencies, and additional revenue fees from outside sources.”
Combined, all of Harrisburg’s general obligation and guaranteed debt totals $459 million. It has skipped about $65 million in incinerator bond payments. That includes $60.3 million of guaranteed GO bonds, $85.4 million of Harrisburg Parking Authority bonds and $82.8 million of Redevelopment Authority debt.
The city missed defaulting on its other outstanding GOs in mid-September when it received upfront money from a lease extension with the Parking Authority.
The Commonwealth Court must conduct a hearing on the recovery plan within 30 days and act on its confirmation of the plan within 60 days.
Natalie Cohen, a managing director for municipal securities research at Wells Fargo Securities LLC, cited the consensual nature of the report, which even included references to the plight of other Pennsylvania cities.
“You see a lot of verbiage about collaboration, cooperation and open conversations — very touchy-feely, to get people to talk. The whole nature of Act 47 is consensual, as opposed to bankruptcy,” she said.
Brad Koplinski is one of four City Council members that fought the receivership, fearing an appointed receiver would favor bondholders at the expense of basic city needs, such as fire and police. But Koplinski’s first reaction to the Unkovic report Monday was favorable.
“On the first read, it looks like a well thought-out plan. He has also recognized that bankruptcy is not off the table” said Koplinski. “We look forward to working with him. ”
Three times the council voted — all by 4 to 3 margins — against the original Act 47 workout plan, reflecting the political division in Harrisburg.
The City Council filed for Chapter 9 protection on Oct. 11, but bankruptcy Judge Mary France in Harrisburg invalidated the petition six weeks later, saying it violated a state restriction on such filings by cities of Harrisburg’s size before July 1, 2012.
She also called it illegal because Mayor Linda Thompson had opposed it.
Subsequent appeals have also failed.
Thompson received Unkovic’s plan but withheld comment. “The mayor is happy the plan is finally public and she said she will review the plan in detail and comment later in the week,” said spokesman Robert Philbin.
Mark Schwartz, the attorney for the City Council, said he would discuss the report with council members later this week.
Assured Guaranty Municipal Corp., the bond insurer for the incinerator project, is also reviewing it, according to a spokeswoman.
