Harrisburg, Pa., council objects to state receiver's recovery plan

By Jim Witters

Wilmington, Del., Feb. 28 - Three members of the City of Harrisburg, Pa., city council object to the Feb. 6 financial recovery plan that the state-appointed receiver submitted to the Commonwealth Court of Pennsylvania, according to documents shared by the council's attorney on Tuesday.

Mark D. Schwartz, who represents the council majority in pursuing bankruptcy proceedings for the city, claims that the receiver's proposed plan fails to meet the standards of Pennsylvania's receivership act.

The council members - Wanda Williams, Dan Miller and John R. Campbell - are asking the Commonwealth Court to deny approval of the receiver's financial recovery plan for the city. The council also wants the court to suspend any asset sales until a comprehensive plan is submitted and approved by the court.

The receiver, David Unkovic, said he is prepared to file for Chapter 9 bankruptcy "in order to protect the ability of the city to perform its vital and necessary services" if he is unable to come to an agreement with stakeholders.

Council objections

Specifically, Schwartz said in the objection:

• The proposed plan, as well as a state consultant's report, "lack the simple matching of funds to obligations that common sense and statute would require";

• The recovery plan's budget numbers for 2011 and 2012 are wrong, and the city's deficit is larger than the figure contained in the plan;

• "There is nothing comprehensive about the plan, nor does it present a budget to deal with the city's actual needs and obligations";

• The plan proposes an "unrealistic time frame" to establish values for assets such as the parking facilities and incinerator and then sell them, "promising a fire sale";

• The plan fails to account for the lost revenue that will occur when the parking facilities and incinerator are sold;

• The plan would leave the city in a worse position, without assets, should the plan fail and should the city opt for bankruptcy;

• The plan contains no provision for seeking recovery of funds associated with the failed incinerator plan;

• The plan "upends" the budget passed by the elected city officials and substitutes a budget that adds $100,000 a year for a mayor's spokesman;

• The receiver has secured no meaningful help from the state; and

• "The receiver admits that this recovery plan has gaps and open items."

Receiver's plan

As previously reported, the key elements of the proposed recovery plan include:

• Directing the Harrisburg Authority and Harrisburg Parking Authority to participate in a request for qualifications and proposal process for the monetization of the incinerator and the parking facilities, creating upfront cash proceeds related to the sale or lease of these facilities;

• Directing the Harrisburg Authority to undertake a request for qualifications and proposal process for management and operation of the water and wastewater systems;

• Directing the city to hire a full-time chief operating officer to lead and manage the day-to-day operations of the city and to make priority and policy recommendations to the elected officials and the receiver;

• Addressing the city's structural deficit with the understanding that additional negotiations and analysis are required;

• Making adjustments to the city's 2012 budget that must be undertaken by the city officials upon Commonwealth Court's approval of the plan; and

• Continuing to implement and enforce an emergency action plan that was issued by the secretary of the Department of Community and Economic Development.

Previous filings

As previously reported, the city's October petition for relief under Chapter 9 of the Bankruptcy Code was dismissed on Nov. 23 in response to objections filed in the case.

The objectors claimed Harrisburg did not qualify as a debtor, citing a Pennsylvania law that was recently amended to prohibit a third-class, financially distressed city from filing bankruptcy until July 1, 2012.

The court is required to conduct a hearing on the recovery plan within 30 days of receipt of the receiver's plan and confirm a plan within 60 days of receipt.

When the court confirms a plan, a four-member advisory committee will be established, including the mayor and city council president, an appointee of the Dauphin County commissioners and an appointee of the governor.

A hearing on the receiver's proposed financial recovery plan for the city is scheduled for March 1.

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