Municipal Bankruptcy - Harrisburg, PA Making Headlines

(Reuters) - If knee-jerk reactions could be taxed, Pennsylvania's capital city could be closer to escaping its $315 million financial hole.

David Unkovic, the man the state appointed three weeks ago to find a way out for debt-ridden Harrisburg, initially faced a barrage of criticism, particularly regarding his past relationships with large creditors of the city.
However, he appears to be converting critics while maintaining his pledge that everyone will feel pain when he unveils his recovery plan for the city.

Unkovic was applauded by 150 people who visited a city bookstore Monday evening to hear what he had to say about his work in developing that plan.

"I want to commend you on some of your comments last week, especially concerning the fact that any credible workout to this issue is going to have to have some clawbacks in relation to the outstanding debt and our creditors," Harrisburg resident Bruce Webber told Unkovic.

Among the attendees were members of Occupy Harrisburg and Debt Watch Harrisburg, a group that has favored bankruptcy instead of a state takeover.

The 57-year-old receiver, who drew public scorn from some of the same people because of his ties to several of the creditors who are suing Harrisburg, garnered approval after the only resident to object to his appointment questioned his political ties to Republican Governor Tom Corbett.

"I'm not a Republican either, by the way. I am a Democrat but I am not a partisan person," Unkovic said.
Harrisburg's city council filed for Chapter 9 bankruptcy protection earlier in the fall, but the case was dismissed by a federal judge, paving the way for a state takeover of the city's finances. The state capital is struggling under the weight of more than $300 million in debt from a revamp of its incinerator.

"Fortunately, you don't have a political agenda . your (concern) is the 48,500 people of the City of Harrisburg," said a city employee and member of AFSCME, one of the unions that's been asked to accept concessions in budget talks for 2012.

A member of Occupy Harrisburg, an offshoot of Occupy Wall Street, even appeared to sympathize with Unkovic's task ahead when he asked, "Why did you take this job?"

Unkovic said he's met with every elected official involved in Harrisburg's debt crisis and talked with many groups, including Occupy Harrisburg and the host of Monday evening's forum, Harrisburg Hope.
He said he created a website, www.pa.gov/harrisburgreceiver, to give people a chance to share ideas about how to get the city out of debt.

Unkovic has petitioned Commonwealth Court to give him an additional 30 days to submit his recovery plan for Harrisburg, which would give him until early February, if approved.

He said he plans to stay on as receiver only as long as it takes to turn around the city.
"I'm going to go away as soon as I can. That's my plan," said Unkovic.

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Posted in harrisburg bankruptcy , Municipal Bankruptcy , pennsylvania bankruptcy

Harrisburg Files For Bankruptcy Protection

(Wall Street Journal)
NEW YORK—After months of contentious debate among city and state officials, Harrisburg, Pa., filed for municipal bankruptcy protection, days before the state Senate was scheduled to vote on taking over the struggling capital city's finances.

The city, which faces $300 million in debt over a failed trash incinerator project, filed the paperwork in U.S. Bankruptcy Court for the Middle District of Pennsylvania, in Harrisburg. A faxed filing late Tuesday wasn't valid, according to Terry Miller, clerk of the bankruptcy court.

The overnight fax had first been reported by Bloomberg News.

Robert Philbin, a spokesman for Mayor Linda Thompson, who had opposed such a filing, said the mayor thinks the move is unfortunate and that it will complicate matters and add to expenses for the city. Mr. Philbin said the mayor would have preferred the council come to her with an alternative plan, and pointed to a recent poll of registered Harrisburg voters showing only 13% supported a bankruptcy filing.

On Aug. 31, the city council had rejected Ms. Thompson's financial recovery plan, which opened the door for Pennsylvania Gov. Tom Corbett to make good on his threat to take over the state capital's finances.

The plan called for an 8% property tax increase and the outsourcing of some city services, but didn't seek to raise revenue with a 1% sales tax surcharge or a tax on commuters, as some city officials had suggested. The mayor had also backed the state's previous proposals to sell the incinerator, as well as the city's parking-garage system.

Mr. Corbett had pledged state funding to the city if it adopted the recovery plan and warned the state wouldn't bail out the city if it rejected the proposal.

Pennsylvania's General Assembly has passed legislation that would allow it to establish a state-run panel to operate Harrisburg, or other cities that reject recovery plans, under Act 47 for aid to distressed municipalities. The state Senate is due to take up the legislation when it reconvenes next week.
City Councilman Brad Koplinski has long advocated for a bankruptcy filing and voted in favor of the filing on Tuesday to give Harrisburg court-ordered protection from its creditors while it seeks solutions to its financial crisis. The filing was made under Chapter 9, the municipal market's equivalent of Chapter 11.

But opponents believed such a filing would likely impose significant losses on bondholders, which could have ripple effects on the state's credit rating and the broader municipal-bond market.
In addition to Mr. Koplinski, council members Susan Brown-Wilson, Wanda Williams and Eugenia Smith voted in favor of the filing, while Kelly Summerford and Patty Kim joined Gloria Martin-Roberts in opposing the action.

Harrisburg is projected to run out of cash to pay bills and cover payroll costs by the fourth quarter.
The filing had little effect on the municipal bond market Wednesday because the city's troubles had been brewing for a long time and because local-government defaults remain rare.

"This has been one of the slowest-moving train wrecks in my memory," so it isn't likely to affect the market, said Christopher Ryon, a portfolio manager at Thornburg Investment Management in Santa Fe, N.M. "For the calendar year, if you include about $500 million in Harrisburg's liability, that would be $1.6 billion of defaults, which is still very low."

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Posted in bankruptcy filings , bankruptcy protection , Chapter 11 Bankruptcy , harrisburg bankruptcy , Municipal Bankruptcy , US Bankruptcy Court