Nov. 18 (Bloomberg) -- David Unkovic, chief lawyer for the Pennsylvania Community and Economic Development Department, is set to run the finances of Harrisburg after Governor Tom Corbett nominated him as the state’s first municipal receiver.
Once approved by a state court, the overseer may act without consent of the capital city’s elected officials. Unkovic’s appointment may be reviewed as soon as Nov. 28.
Corbett on Oct. 24 declared a fiscal emergency because municipal leaders failed to enact a plan to deal with debt from an overhaul and expansion of a trash-to-energy incinerator that doesn’t generate enough revenue to cover the obligations. Harrisburg entered bankruptcy last month.
“The city’s financial situation continues to get worse,” Corbett said today in a statement. “With his more than 30 years of experience in public finance, I have the utmost confidence in David Unkovic’s ability to develop and implement solutions that will address the city’s fiscal difficulties and mounting debt.”
Most council members said bankruptcy is the solution for the community of 49,500 and that is should supersede a receivership. They voted to seek court protection Oct. 11, a move challenged by Mayor Linda Thompson and Corbett. A federal judge will consider the validity of that effort Nov. 23.
Mark Schwartz, the council’s bankruptcy lawyer, said a receiver’s appointment would violate a legal prohibition against lawsuits or other legal actions against a debtor.
Corbett acted “recklessly” and “his position remains about process instead of real aid for Harrisburg,” Schwartz said by e-mail.
Harrisburg guaranteed about $242 million of debt related to the incinerator, with $65 million of it overdue, according to court papers. The council rejected selling assets to repay creditors and raising property taxes on residents, 29 percent of whom live in poverty.
The receiver would be able to sell the incinerator and the municipality’s parking system, hire advisers and suspend the authority of elected officials. Within 30 days of his court confirmation, Unkovic must craft a recovery plan.
At a news conference today in the Capitol, Unkovic said he would start talking to people before he’s formally appointed.
“I will undertake these duties with determination and also with humility,” Unkovic told reporters.
Opponent Turned Receiver
Before he began working for the state in July, Unkovic spent three years at the law firm of Cozen O’Connor LLP, which Pennsylvania hired to oppose the Harrisburg bankruptcy. His career includes jobs at law firm Saul Ewing LLP and investment company PFM Asset Management LLC.
Corbett also hired Washington-based McKenna Long & Aldridge LLP to work with Unkovic, the governor said. The law firm will aid the audit of the incinerator’s bond deals already under way, and Unkovic said that would affect negotiations with city creditors.
McKenna employees who will will work under Unkovic’s direction include Thurbert Baker, a former Georgia attorney general; Anthony A. Williams, former District of Columbia mayor; Stephen Goldsmith, who has been mayor of Indianapolis and deputy New York mayor; and Hakim Hilliard, a former assistant Atlanta city attorney.
The contract with the law firm is in process, and Unkovic’s salary is $125,000, said Steven Kratz, a spokesman for the Community and Economic Development department.
A Pennsylvania House of Representatives analysis estimated the cost of receivership to be as much as $2.55 million in the first year, with the city bearing 60 percent of that expense.
The receiver case is C. Alan Walker V. City of Harrisburg, 569MD 2011, Pennsylvania Commonwealth Court, (Harrisburg). The bankruptcy case is In re City of Harrisburg, Pennsylvania, 11-06938, U.S. Bankruptcy Court, Middle District of Pennsylvania (Harrisburg).
To contact the editor responsible for this story: Mark Tannenbaum at email@example.com