Harrisburg will grow stronger. Or become a ghost town. Or muddle through to eventual, hard-fought stability.
These three visions were presented last month by three city officials: Mayor Linda Thompson, Councilwoman Eugenia Smith and receiver David Unkovic, respectively, as each spoke extensively about where the city could be heading under the receiver’s financial recovery plan.
“We’re going to end up putting the burden on the taxpayers,” said Smith. “Taxes will be raised, and people will not be able to afford to live in this city under these plans. It’s just a fact.”
Thompson, Smith and Unkovic offered their differing opinions during a two-hour forum sponsored by the community group Harrisburg Hope and held before a large crowd of some 200 people at Midtown Scholar Bookstore.
Smith reiterated her support for municipal bankruptcy as the only way that the city could avoid disposing of its valuable assets, such as its parking garages. Without the revenue from these assets, the city was certain to eventually declare bankruptcy and/or raise taxes to such a level that residents would be driven out, she said.
Thompson passionately disagreed with that assessment, calling the financial crisis “solvable.”
She likened Harrisburg’s dire situation to that of an individual in a similar predicament.
That person, she said, might have to leverage his house to pay his debts, and Harrisburg also must sell or lease its most valuable assets. The other alternative: immediately raising taxes to unacceptable levels, she said.
“I’d rather have the assets I can leverage than raise your taxes,” she said. “It’s going to be painful but as long as we have assets, I will not put it all on you.”
For his part, Unkovic said he had no choice but to immediately put the city’s parking assets and its incinerator on the market to raise the cash to settle about $317 million in debt accumulated over many years from upgrades to the city’s troubled incinerator.
He must determine how much these assets are worth, he said, before he can move on to subsequent steps, such as asking for concession from labor unions and the city’s creditors.
“Once we know what these numbers are, then we can negotiate with the creditors,” he said.
Unkovic said that municipal bankruptcy remains on the table, but only as a final resort.
“We don’t want a city in bankruptcy,” he said. “It’s better to work a solution out without bankruptcy.”
Thompson and Smith did agree on one thing—that Unkovic has proven himself to be better friend of the city and a far better, more conscientious leader than either imagined when the state passed a bill mandating a receiver last year.
“We couldn’t have asked for a better person to be receiver,” said Smith.
Both she and Thompson defended Unkovic from a charge by city resident Ron Chapel, who accused him of practicing “plantation politics” and wanting to force “undesirables” out of the city.
“Mr.Unkovic and I have a cooperative relationship,” said Thompson. “I respect him, and he respects me.”
The forum was held as the city marked another low point in its long financial crisis.
On the same day as the forum, Harrisburg defaulted on $5.3 million of general obligation bonds. While it has defaulted previously on incinerator bonds it has backed, it had never defaulted on its own bonds, which finance city operations.
Unkovic said that he didn’t want to order the default. However, two weeks before, he forbade the city from continuing to transfer money from its water/sewer fund to its general fund to meet operational expenses. Therefore, the city had no money to pay the bonds, unless it stopped paying its municipal workforce.
“The reason the general obligation bonds weren’t paid was to obligation bonds weren’t paid was to ensure that vital services continue,” he said. “It’s unfortunate the city can’t make this payment, but some things may get worse before they get better.”
The greatest applause from the audience came when Unkovic said he had turned over the Harrisburg Authority’s recent forensic audit on the incinerator to his team’s laywers for analysis and possible action. He previously has questioned the legitimacy of several bond financings related to the incinerator.
“I’ve asked my lawyers to go through the forensic analysis carefully and determine if there are areas of action that can be brought,” he said.
