Pennsylvania seeks appointment of new receiver for city of Harrisburg

By Jim Witters

Wilmington, Del., May 14 - The Pennsylvania state government is asking the court to appoint a new receiver for the City of Harrisburg, Pa., according to documents filed Friday with the Commonwealth Court of Pennsylvania.

C. Alan Walker, secretary of the Department of Community and Economic Development, has nominated retired Air Force major general William B. Lynch to fill the vacancy left when David Unkovic resigned on March 30.

A hearing on the appointment is scheduled for 10:30 a.m. ET on May 24.

Unkovic was appointed at the request of Harrisburg Mayor Linda D. Thompson, who turned to the state for help with the city's precarious financial position.

The city's financial woes include six legal actions related to $242 million of outstanding bonds guaranteed by the city for construction of an incinerator.

Incinerator owner Harrisburg Authority is unable to pay the bond issues.

Under the guarantees, the city would be required to pay a combined $83 million of past-due payments and 2011 debt service.

The city suffered a $5.35 million budget deficit in 2010 and a $3 million deficit in 2011 without paying any guaranteed bond obligations.

Unkovic said in a letter to the court, "I have done my best to use my powers as receiver to bring fiscal stability to the City of Harrisburg. However, I find myself in an untenable position in the political and ethical crosswinds and am no longer in a position to effectuate a solution."

As previously reported, the city council has asked the court to halt "all activities purportedly taken" under Unkovic's receivership until Unkovic provides a full explanation under oath of the circumstances of his resignation.

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.

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