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Harrisburg, Pennsylvania, Receivership Oversight Ended

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Feb. 26 (Bloomberg) -- Harrisburg, the once-insolvent capital of Pennsylvania, won an end to court oversight of its receivership after implementing a debt-restructuring settlement with creditors owed $362.5 million.

Commonwealth Court Judge Bonnie Leadbetter in Harrisburg agreed to dismiss the case and end the receivership on March 1, about six months after she approved a recovery plan negotiated with creditors that ended a fiscal emergency in the city of 50,000. Leadbetter will retain authority to enforce the plan, known as the Harrisburg Strong Plan, should that be necessary, according to an order she entered yesterday.

“The receiver is no longer vital and necessary to successful implementation of the remaining components of the Strong Plan in the absence of a fiscal emergency,” Leadbetter said in her order.

The crisis stemmed from an overhaul and expansion of a waste-to-energy incinerator, which didn’t generate enough revenue. Harrisburg in December reduced its debt burden, which had run to about seven times its general-fund budget, through the sale of the incinerator, lease of a parking system and concessions from creditors.

In 2011, the city council defied the mayor and state officials by placing Harrisburg, which has a poverty rate more than twice the state average, under bankruptcy court protection. The case was thrown out after the judge concluded the council didn’t have the necessary authority from the state to file.

Two Receivers

Governor Tom Corbett, a Republican, then appointed bond attorney David Unkovic as receiver. Unkovic later resigned and was replaced by William B. Lynch.

State law gave Lynch the authority to negotiate a settlement, not impose taxes or take other actions needed to implement a deal. While the law allowed Leadbetter to help the city negotiate, she lacked the authority to impose cuts on unwilling creditors.

The case is Walker v. Harrisburg Authority, 569-MD-2011, Pennsylvania Commonwealth Court, Pennsylvania (Harrisburg).

To contact the reporters on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net; Romy Varghese in Philadelphia at rvarghese8@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.

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