2012-05-31 / Obituaries

Harrisburg Financial Overseer Expected To Be Fired

By MARC LEVY

ASSOCIATED PRESS

HARRISBURG, Pa. (AP) – The former financial custodian forPennsylvania’s cashstrapped capital on Thursday said he abruptly resigned in part to avoid being fired, and he told a packed courtroom that solving the city’s massive debt as a financial problem, and not a political problem, will take commitment from the state’s most powerful politicians.

DavidUnkovic’s testimonywas allowed by Commonwealth Court Judge Bonnie Brigance Leadbetter to clear up “speculation, gossip and rumors’’ that followed his March 30 exit in an eyebrowraising handwritten letter to her, she said.

The hearing before Leadbetter was scheduled so she could decide whether a retired Air Force general nominated by Gov. Tom Corbett will be Unkovic’s successor as the leader of an unprecedented state takeover of one of its cities.

Leadbetter did decide to appoint William B. Lynch, butUnkovic’s testimony was the focus of the hearing, especially because two days before he resigned he called for a federal or state investigation into the financing of a retrofit for the city’s municipal trash incinerator – a massive debt that has dragged the city into insolvency.

Under questioning by Leadbetter, Unkovic, a career municipal bond lawyer who was appointed to the job in December, said he quit partly because he had expected to be fired shortly.

But he also opened a window into the political forces surrounding the debt, suggesting that he’d been under pressure by the area’s state senator, Jeff Piccola, RDauphin, and a lobbyist for Dauphin County and Assured Guaranty Municipal Corp. of New York, two of Harrisburg’s biggest creditors.

They wanted him to approve a recovery plan that he did not view to be in Harrisburg’s best interests, Unkovic said. In addition, Assured Guaranty and bond trustees that were suing Harrisburg had successfully pressed a county judge to give them control of the incinerator, which Unkovic said effectively gave a key asset to assist in Harrisburg’s recovery to some of the biggest offenders in piling debt onto it.

Harrisburg’s deep debt, he said, is a financial and political mess that must be solved as a financial problem.

“It can be if the highest political powers in the state want it to happen,’’ Unkovic told Leadbetter.

Unkovicdidnot elaborate further, but said at another point that his would-be successor, Lynch, can solve the problem “if he has the confidence of the governor.’’

An Oct. 20 law that paved the way for the state’s takeover was part of a broader effort by Corbett and the Republican-controlled Legislature to force Harrisburg to pay down the approximately $300 million debt tied to the incinerator without letting it slap a tax on commuters or seek federal bankruptcy protection to extract concessions from creditors. Under the law, the receiver has broad authority over the city’s day-to-day financial dealings, as well as the power to sell city assets and negotiate contracts, but not to raise taxes.

The city and the city authority that owns the incinerator are tens of millions of dollars behind in payments on the debt tied to it, and city officials have not developed a plan to repay it.

The day before Unkovic’s resignation, Corbett’s legal advisers made it clear in a meeting that his hastily called press conference the prior day to call for an investigation went against their agreement on how he would conducthimself, Unkovic said.

That and other blunt statements he had made about the creditors had led Corbett’s legal staff to believe that he would be unable to negotiate an agreement with the creditors, Unkovic said.

“I believed I was about to be removed as receiver,’’ Unkovic told Leadbetter.

A spokesman for Corbett’s

Department of Community and Economic Development, which employs the Harrisburg receiver, insisted Thursday that the administration had had no plan to remove Unkovic. However, the spokesman, Steve Kratz, said they had become concerned with what they viewed as increasingly “irrational’’ public behavior – for instance, pounding his fist during a court hearing – and they believed it was detrimental to his work and worried that the pressure of the job was getting to him.

“It became clear that he couldn’t handle it,’’ Kratz said. Still, he contendedthat state officials had had the “utmost confidence’’ in Unkovic.

Unkovic also said he resigned partly because of the county judge’s decision on the incinerator – it gave creditors the power to nominate a completely separate receiver to operate the facility. The judge’s decision was appealedby the Harrisburg Authority to Commonwealth Court.

In his letter to Leadbetter, Unkovic wrote that he had found himself “in an untenable position in the political and ethical crosswinds.’’ A lawyer for city council members, Mark Schwartz, said afterward that he did not believe that Unkovic had fully explained what he meant by “ethical crosswinds.’’

Return to top