Harrisburg Court Approves Receiver for Pennsylvania Capital
December 04, 2011, 8:54 PM ESTBy Steven Church
(Updates with excerpt from court order in third paragraph.)
Dec. 2 (Bloomberg) -- A judge approved a state takeover of Harrisburg, the capital of Pennsylvania, giving a receiver from the governor’s office the power to end a stalemate between the mayor and the city council over the city’s financial crisis.
David Unkovic, chief lawyer for the state economic development department, was confirmed today by Pennsylvania appellate court judge James R. Kelley in Harrisburg, who found that the city is insolvent and unable to agree on a plan to end its financial turmoil. Unkovic was nominated for the job by Governor Tom Corbett
“The Receiver is ordered to develop a recovery plan within 30 days,” Kelley said in a court order issued today.
Unkovic was granted the power to override Harrisburg’s mayor and city council, who have been feuding over how to solve a budget crisis. The council tried to put the city beyond the reach of a state receiver, and creditors owed more than $242 million, by filing bankruptcy in October. The ploy failed when the petition was thrown out by a federal judge six weeks later after being opposed by Corbett and Mayor Linda D. Thompson.
In court testimony on Dec. 1, Unkovic told Kelley that he will review the documents used to justify the bond debt that is responsible for the city’s insolvency. The city guaranteed repayment of about $242 million in bonds related to a waste-to- energy incinerator that doesn’t make enough money selling electricity to cover the debt.
Uncommon Structure
The structure of those bonds “is uncommon,” Unkovic told Kelley during a hearing. “It is disturbing to me.”
The bonds themselves couldn’t be challenged, no matter what a review uncovers, Unkovic said in an interview after the hearing. The law does allow legal action against entities that provided false information to support a bond issue, Unkovic said. He declined to answer questions about what aspects of the incinerator bonds’ structure he considered disturbing.
Unkovic, along with law firm McKenna Long & Aldridge, is going to review the deals as part of the process to develop a recovery plan for the city, said Steven Kratz, a spokesman for the economic development department said.
The receiver case is Walker v. City of Harrisburg, 569MD 2011, Pennsylvania Commonwealth Court (Harrisburg).
--With assistance from Romy Varghese in Philadelphia. Editors: Stephen Farr, John Pickering
To contact the reporter on this story: Steven Church in U.S. Bankruptcy Court in Wilmington, Delaware, at schurch3@bloomberg.net.
To contact the editors responsible for this story: John Pickering at jpickering@bloomberg.net.
