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Harrisburg Officials Seek to Halt State Receivership Case

May 10 (Bloomberg) -- Elected officials of Harrisburg, Pennsylvania, asked a judge to suspend the state’s takeover of city finances until a court investigates the resignation of former receiver David Unkovic.

Three officials who have opposed efforts by the city’s mayor and the state to restructure Harrisburg’s finances asked the judge overseeing the receivership to halt any work by Governor Tom Corbett related to the takeover, according to a document provided by Mark Schwartz, the officials’ lawyer.

Unkovic sent a handwritten letter to the court in March, saying that he was quitting because of his “untenable position in the political and ethical crosswinds.”

“Given the wording of the Receivership Act and the words of Mr. Unkovic, everything with respect to the Harrisburg Receivership needs to be halted,” Schwartz wrote in his motion on behalf of Council President Wanda Williams, Controller Dan Miller and Treasurer John Campbell.

The three officials asked state appeals court Judge Bonnie Leadbetter to hold a hearing and require Unkovic to explain his resignation. All receivership activity should be suspended until that hearing, the officials said.

Steven Kratz, a spokesman for Pennsylvania’s economic development department, said the state intends to nominate a replacement for Unkovic.

‘Remain Focused’

“We remain focused on nominating a new receiver and the ongoing fiscal recovery efforts including the implementation of the court-approved recovery plan,” Kratz said in an e-mail.

Mayor Linda D. Thompson called the request for a hearing and opposition to the proposed recovery plan “distractions.”

“Those council members who oppose the court-ordered financial recovery plan are simply stalling the process as much as they can get away with, just as they have over the last two years,” Thompson said in a statement today.

Before he resigned, Unkovic filed an initial version of a plan that proposed selling or leasing city assets, including a trash-to-energy plant that doesn’t generate enough revenue to cover more than $300 million in debt.

The debt is one of the main reasons Harrisburg, the state’s capital, is insolvent. In March, the city of 49,500 announced it would miss $5.27 million in bond payments. It earlier defaulted on payments it guaranteed on the waste-to-energy incinerator.

The plan divided Harrisburg officials, with the controller, treasurer and some members of the city council opposing Unkovic. Thompson had supported him.

The receiver case is TD Bank NA v. Harrisburg Authority, 2010-CV-11737, Court of Common Pleas, Dauphin County, Pennsylvania (Harrisburg).

To contact the reporter on this story: Steven Church in Wilmington at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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