HARRISBURG, Pa. — Harrisburg Mayor Linda Thompson on Tuesday urged the Commonwealth Court of Pennsylvania to require the capital city’s new state-appointed receiver to implement her proposed financial recovery plan.
Harrisburg is in debt to the tune of $310 million, mostly related to cost overruns to its incinerator retrofit. Gov. Tom Corbett has appointed a receiver, David Unkovic, to manage the city’s finances, subject to Commonwealth Court approval. Meanwhile, a hearing is scheduled for Wednesday in federal bankruptcy court on the City Council’s bankruptcy filing, which Thompson, Corbett and major creditors oppose.
“The mayor’s [plan] is a reasonable plan and if implemented would alleviate the city’s financial distress,” Thompson’s attorney, Kenneth Lee of Tucker Arensberg PC, said in a court filing. It added that the Thompson plan, which includes the sale or lease of the incinerator and revenue-producing parking garages, would create a surplus for fiscal 2012.
Thompson was scheduled to present her budget to the council Tuesday night.
“This is pathetic. This is someone trying to hang on by her teeth,” the City Council’s attorney, Mark Schwartz, said of the mayor’s filing.
Thompson’s plan is largely similar to a recovery plan state-appointed Novak Consulting Group Inc. recommended in June. The City Council rejected it and two more recommended by Thompson before filing for bankruptcy last month.
Harrisburg has skipped about $60 million in bond payments on the incinerator project, for which the city and Dauphin County issued guarantees. The bond insurer is Assured Guaranty Municipal Corp.
Schwartz complained that the Commonwealth Court timetable for implementing state receivership is too hasty. “As an officer of the court, I must register personal and legal concerns, both of which relate to fundamental due process,” he said in Monday’s petition.
Schwartz has also contested the takeover in the U.S. Bankruptcy Court for the Middle District of Pennsylvania, where Judge Mary France will consider the legality of the Chapter 9 filing on Wednesday.
Corbett on Friday nominated Unkovic, the general counsel of the state Department of Community and Economic Development, after declaring a fiscal emergency in the city.
Unkovic, speaking at a recent press conference, said he would get to work immediately, even though he needs court confirmation. “The truth is, we need a plan, and we need to get to a good plan as soon as we can,” he said.
But Schwartz said the timetable is too soon. The Commonwealth Court, one of Pennsylvania’s two statewide intermediate appellate courts, has asked that legal memorandums be submitted by Monday, with a hearing on the actual appointment set for three days later, Dec. 1.
“I frankly do not understand the rapidity of events with respect to this court’s consideration of the commonwealth’s petition,” wrote Schwartz, who also cited a personal commitment right after Thanksgiving.
The four City Council members who voted for the bankruptcy — Brad Koplinski, Wanda Williams, Eugenia Smith and Susan Brown-Wilson — objected to the appointment of Unkovic, pointing to his ties to three firms that are representing bondholders.
Unkovic worked for 27 years for law firm Saul Ewing LLP, which is representing bond insurer Assured Guaranty Municipal Corp. Unkovic has also worked for Public Finance Management Inc., which represented Dauphin County in a financing of the incinerator debt, and for law firm Cozen O’Connor LP, which is objecting on behalf of the state to a bankruptcy filing by the Harrisburg City Council.
In addition, Unkovic has represented RBC Capital Markets, an underwriter of bonds issued on the credit.
Reporters asked Unkovic at his introductory press conference whether creditors should be fully paid or take a haircut.
“I’m going to negotiate seriously with the creditors. Each creditor is in a different situation, and we’ll evaluate how to approach each creditor,” he said. “But part of that process is looking at how we got here, and what occurred in the financings related to the incinerator.”
