Bloomberg News

Harrisburg’s Receiver Wants Help on Debt Hole From Diggers

December 09, 2011

Dec. 8 (Bloomberg) -- David Unkovic, the receiver for Pennsylvania’s insolvent capital of Harrisburg, wants the people who helped create the debt to assist in its elimination.

A former bond lawyer from the Philadelphia suburb of Wynnewood, Unkovic faces a Jan. 3 deadline to develop a recovery plan for Harrisburg, which owes a sum five times its general- fund budget. Residents need to know who brought them to this point, Unkovic said in an interview in Harrisburg, “and they will.”

“You need to factor in the actions they took,” he said. That will set “what their level of responsibility is for helping to come up with a solution.”

Unkovic, 57, is Pennsylvania’s first municipal receiver. The state joins Michigan, Rhode Island and New York in asserting greater control over municipal affairs, signaling more willingness from states to act when threatened by higher borrowing costs and the collapse of cities.

Five days after Republican Governor Tom Corbett nominated him, Unkovic told firms involved in the debt Harrisburg incurred for an incinerator project to preserve their documents, and has asked lawyers to aid a forensic audit of the bond deals.

“He’s the first person committed to have the whole story laid out,” said Neil Grover, a lawyer and founder of Debt Watch Harrisburg, which opposes the receivership law. Even if no one faces legal action, “if they crossed the line, at the least the public would be aware of that.”

Past and Present

Unkovic, who kept a typewriter and antique desk in his office at Philadelphia’s Cozen O’Connor law firm, appreciates history, said Suzanne Mayes, a lawyer who worked with him there. “Dave is of the school that you can learn a lot about a current challenge by knowing what happened,” she said.

Harrisburg, a city of 49,500 on the Susquehanna River, in 2003 overhauled a trash-to-energy plant that was violating environmental regulations. While now operating near capacity, the facility doesn’t generate enough revenue to pay the debt, which grew after the first contractor, Barlow Projects Inc., was dismissed, and Covanta Holdings Corp. was hired to complete the work. The financing contained no performance bond to protect the city, which Unkovic called unusual.

Harrisburg started skipping payments in 2009 and owes $310 million, including penalties to bond insurer Assured Guaranty Municipal and surrounding Dauphin County, which backed some of the debt after the city failed to meet its obligations.

Breaking the Logjam

Harrisburg, where 29 percent of residents live in poverty, almost defaulted on general-obligation bonds this year and last, and struggled to cover its payroll and fill sinkholes.

Mayor Linda Thompson and the City Council disagreed on solutions, and the panel voted 4-3 for a bankruptcy that was later thrown out of court. Amid the standoff, legislators empowered Corbett to name a receiver. On Nov. 18 he nominated Unkovic, and a state court approved his two-year term Dec. 2.

The receiver is contacting creditors, elected officials, and groups such as Debt Watch Harrisburg. He plans to answer questions at a Dec. 19 public meeting and establish a website for comments, he said.

“I want to be as open to people as I can,” said Unkovic, who doesn’t need elected officials’ consent to act.

Thompson said she was confident she would support Unkovic’s plans because the two have met regularly.

“I’m not relegated to the side,” she said. “He’s really getting my input.”

Harrisburg Controller Dan Miller said he was surprised by Unkovic’s outreach.

“He did not come off as a slick corporate attorney trying to impress me with flash and dash,” Miller said in a phone call. “I feel comfortable with him.”

Plunging In

The approach is familiar to people who know him. Unkovic has volunteered for Philadelphia VIP, which provides poor residents with legal services, for a quarter-century. He spent more than 100 hours working on a mix-up involving delinquent taxes that jeopardized a woman’s home, said Executive Director Sara Woods.

“Dave is willing to take on our hard cases, those that aren’t pretty,” Woods said. “He’s not afraid of a challenge, which will help him in Harrisburg.”

The son of a lawyer and a homemaker, Unkovic was the fourth of six children raised in the North Hills suburbs of Pittsburgh. Attending North Catholic High School in the city’s Troy Hill neighborhood, he could smell soup being made at the H.J. Heinz Co. plant nearby, he said. He played first base in American Legion Baseball; he would later play softball for his law firms wielding an old-fashioned wooden bat.

‘Terrible Litigator’

Unkovic got his law degree from Harvard University in 1979 after majoring in political science at the University of Pennsylvania. At Saul Ewing LLP in Philadelphia, he decided he was a “terrible litigator” and focused on public finance, later moving to PFM Asset Management LLC and Cozen.

Unkovic entered Corbett’s administration in July as general counsel for the Community and Economic Development Department.

His career aroused suspicion in people including Mark Schwartz, the Harrisburg council’s bankruptcy attorney.

“There are inherent problems” with Unkovic’s receivership since he has worked for clients involved in Harrisburg bond deals and former firms have represented creditors, Schwartz said. At a hearing Dec. 1, Unkovic told the judge who approved his appointment that he had no conflicts of interest.

Unkovic, who stays in a Harrisburg apartment and returns on weekends to Wynnewood, said he volunteered for this job.

“I just felt very strongly that this problem could get solved, and I’d like to participate in helping get it done,” he said.

--Editors: Stephen Merelman, Ted Bunker

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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