Harrisburg council objects to planned appointment of receiver by state

By Jim Witters

Wilmington, Del., Nov. 21 - The Harrisburg city council objected Sunday to a move by the state to appoint a receiver for the city, according to documents filed with the Commonwealth Court of Pennsylvania.

C. Alan Walker, secretary for the state's Department of Community and Economic Development, petitioned Nov. 18 for the appointment of a receiver for the city under a recently amended state law concerning financially distressed municipalities.

City council Attorney Mark D. Schwartz argues in the objection that the amended law does not apply to the Harrisburg case because it became effective after Harrisburg filed its Chapter 9 petition and because the automatic stay in bankruptcy cases prohibits such actions.

U.S. bankruptcy law takes precedence over state law, he states in his filing.

"The passage of the law authorizing the appointment of a receiver came on Oct. 20, 2011, after the Chapter 9 proceeding was filed. The law is an amendment to Act 47, but it did not repeal or amend the authority given by the commonwealth to municipalities to file Chapter 9 petitions," Schwartz wrote.

"Moreover, the law did not specifically state that it would apply retroactively. The passage of the law authorizing the appointment of a receiver for a municipality after it filed a Chapter 9 petition is ineffective," he wrote.

No hearing has been scheduled.

Mayor meets proposed receiver

Meanwhile, Harrisburg mayor Linda D. Thompson met Nov. 18 with David Unkovic, chief counsel of the Pennsylvania Department of Community and Economic Development to review the next steps in the process of implementing a municipal financial recovery plan, according to a press release from the mayor's office.

The mayor opposes the council's Chapter 9 filing and supports a state takeover of the city's finances under the new law.

Pennsylvania governor Tom Corbett declared Harrisburg to be in a state of fiscal emergency soon after Act 47 was amended. The amendment prohibits cities from filing bankruptcy petitions before July 2012.

"Following Gov. Corbett's nomination of Mr. Unkovic, I'm confident we will now move the city of Harrisburg more efficiently forward toward long-term fiscal solvency," Thompson said in a press release.

Thompson said she expects the court to approve Unkovic's appointment this week.

Thompson also has met with representatives of McKenna Long & Aldridge LLP, a Washington, D.C., firm that specializes in public finance.

As previously reported, the city's financial woes include six legal actions related to $242 million of outstanding bonds guaranteed by the city for construction of an incinerator.

Incinerator owner Harrisburg Authority is unable to pay the bond issues.

Under the guarantees, the city would be required to pay a combined $83 million of past-due payments and 2011 debt service.

The city suffered a $5.35 million budget deficit in 2010 and is projected to a have a $3 million deficit this year, without paying any guaranteed bond obligations.

Harrisburg's Chapter 9 case number is 11-06938.

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