Harrisburg could receive a financial recovery plan by mid-May as Pennsylvania Wednesday announced that Novak Consulting Group will head a team of advisers to work with city officials on a fiscal strategy.
Novak Consulting provides general advisory work to local governments and will serve as the team’s coordinator. The group of outside professionals includes the Pennsylvania Economy League, which will provide the primary financial analysis, according to Novack president Julia Novak. PEL is an independent public policy and research organization.
Also on board is Bob O’Donnell of O’Donnell Associates and Stevens and Lee PC for legal counsel on debt restructuring and labor relations, among other issues, Novak said.
Novak Consulting will head the group and look into ways that Pennsylvania’s financially ailing capital city can operate with limited resources.
“Our role, besides overall coordinating the project, is the actual municipal operations and looking at efficiency, staffing, and structure, and things like that,” Novak said.
Novak Consulting and Stevens and Lee, along with Public Financial Management Inc., developed a fiscal recovery plan for Reading, located in southeastern Pennsylvania. Officials are now reviewing that initiative. PFM served as the team coordinator on the project.
Pennsylvania’s Department of Community and Economic Development announced Wednesday its selection of advisers to help Harrisburg craft a financial strategy. The city is under the state’s distressed municipalities program, called Act 47.
The DCED and the outside professionals will now work on finalizing contracts, which takes about 30 days, according to spokeswoman Jamie Yates. Once the contracts are in place, the team has 90 days to develop a financial recovery plan. Harrisburg will then hold public hearings on the plan.
Any proposal requires approval from Mayor Linda Thompson, the City Council, and the state. For more than a year, the mayor and the council have been unable to agree upon a plan to tackle Harrisburg’s finances.
The city has $282 million of incinerator debt that it has not paid debt service on. Tight cash reserves left Harrisburg scrambling to meet payroll and a $3.3 million general obligation payment in the latter half of 2010. The political stalemate between Thompson and some council members has hindered the city’s ability to dig itself out of the fiscal crisis.
“What we want to do is find a solution that people can not only live with, but that they will implement,” Novak said. “So part of our job is to get everybody on board, the mayor and the council.”
Thompson released a statement Wednesday in support of the DCED’s announcement of the team and expressed her desire to meet with the professionals as soon as possible. Councilman Brad Koplinski, who has said that the city should consider a bankruptcy filing, wrote in an e-mail that he looked forward “to having them present their qualifications and thought processes to the council soon.”
Thompson has long said that the city should avoid Chapter 9. She will discuss the 2011 budget in a news conference Thursday.
Thompson spokesman Chuck Ardo said the mayor, as of late afternoon on Wednesday, still had yet to decide whether she would sign off on the budget, let it pass without her signature, or veto the budget altogether. The City Council late last month passed Thompson’s 2011 budget with additional spending cuts.
Harrisburg entered into the Act 47 program on Dec. 15. The council in November selected Cravath, Swaine and Moore LLP to advise it on Chapter 9 and Act 47. Koplinski said the firm will offer its recommendation to the council by March 31.
Harrisburg did not pay debt-service costs on the incinerator bonds in 2010 and did not include the payments in its 2011 budget. The city guarantees the incinerator debt.
Dauphin County, co-guarantor of the bonds, and Assured Guaranty Municipal Corp. have been making payments to bondholders.