The Day Before The Receiver’s Recovery Plan Arrives

***The Receiver’s Plan was filed Monday, February 6th. Access: Receiver’s Recovery Plan

Let’s talk Receiver’s Recovery Plan for the City of Harrisburg. It comes out Monday for all to see. And the big question is, what will be in it?

The Receiver himself has given us some indication on what we can expect and what we shouldn’t. While there is much public pre-focus and media premonition on “concessions” and “assets,” David Unkovic has already stated for all to hear that he will not include specific concessions or asset deals in this version of the plan. That’s right. This version–Version I. To be followed by Version II. Unkovic has been clear about this. One of the last things he stated at his Public Forum on January 18th was, “I’m telling you now that I do intend to file a plan then amend the plan.” That is, we won’t know a comprehensive recovery plan for the City of Harrisburg until mid-year when he anticipates filing his amendment to this February 6th plan.

Thus, when we see his plan on Monday, don’t expect Unkovic to have revealed too many details on the City’s assets. Don’t look for conclusive negotiations with creditors and unions. Don’t look for specific numbers. Don’t look for specific deals. Don’t look for the shared pain.

It’s all about the timing. This is yet another thing Unkovic has discussed during his outings amongst the citizens of Harrisburg. It’s why he requested the extension to file his plan.

As of now, Unkovic’s timeline goes something like this: Feburary 6th, he’ll file his initial Recovery Plan for the City of Harrisburg. Within 30 days, the Commonwealth Court will have a public hearing on his plan and within 60 days, confirm the plan. This schedule could be adjusted if the Court determines his plan to be “arbitrary, capricious or wholly inadequate to alleviate the fiscal emergency in the distressed city.“ Then the Receiver will have to make adjustments to the plan and go back to the Court with it.

However, it’s doubtful that will be the case. More likely, the Commonwealth Court will hear the plan soon after its filing and confirm it rather quickly, just as it heard and confirmed Unkovic as Receiver rather quickly. It can also be assumed that there will be much in the plan the State will agree with. In this next Recovery Plan, there will be substance from the original Novak Coordinator’s Act 47 Plan which was substance of the Management Partners Plan. Despite that, though, the Receiver has declared, “I didn’t come into this with a predisposition to just stamp whatever the old plan was and life goes on.”

As if to demonstrate that’s true, Unkovic’s pointed to blunders in the previous Act 47 plans. He said that the Coordinator’s Plan as well as the Mayor’s Plan “made certain assumptions about what assets are worth and what stranded debt would be.” Just as several citizens proclaimed during Act 47 public hearings, Unkovic explained there is really no way to determine an actual number for the City’s stranded debt before real deals are arranged and made.

Until that happens–until there are these actual numbers for the assets and actual numbers for concessions—the Receiver has said, “The problem is, as I see it, you don’t know if that number’s $26 million, $80 million, or zero or what.”

For the citizens who kept repeating that same point until they were feeling blue in the face, this is a relief to hear. It not only indicates they were correct, but it also establishes the possibility that Unkovic will be smart, thoughtful, and fair about the way in which the City’s assets will be evaluated, price-tagged, and settled in relation to getting concessions from creditors and unions. Could it be that Unkovic will truly arrange satisfactory shared pain?

The problem is, though, David Unkovic did not come here alone. If you think back to the first ever peek, picture, and presentation of Unkovic, it occurred with a team of prestige behind him. He may be the face of Harrisburg’s State takeover, but he’s not without a troupe.

That troupe is McKenna Long & Aldridge LLP (MLA), a super merge of a renowned Washington D.C.-based law firm and a renowned Atlanta-based law firm producing a legal machine of incredibly skilled and practiced attorneys specializing in the nexus of business and government.

The State retained this law firm for the Office of the Receiver. Other than during last November’s Receiver premiere, we don’t ever see the McKenna lawyers. They don’t ever talk to Harrisburg’s general public, but they are there in the background doing the public’s business. We can catch proof of them on legal documents the Receiver has filed such as in the TD Bank/M&T/AGM vs. THA/City/City Treasurer lawsuit. This suit is often referred to as “The Big One” not because of the groups involved, but because it’s the one that can ruin the City of Harrisburg. The banks and bond insurer who’ve been forced to make THA’s missed debt payments to the bondholders seek an order for the City’s “first dollar” in repayment. What this means is that if TD Bank et al. win, the City would be required to give its revenue to them first—before City employees get paid, including Police and Fire; before City services; before any other and all expenses.

To help guarantee they get the relief they feel they deserve, the Plaintiffs are also asking the Court to appoint a Receiver (separate from Unkovic) to assume control over the Incinerator.

As State-hired counsel for the Office of the Receiver, McKenna has issued arguments that the Harrisburg Receiver trumps an Incinerator Receiver. McKenna declares the Plaintiffs’ desire to seek such extreme relief “emasculates and frustrates” the Receiver’s statutory duty to confront the City’s debt problems.  Basically the Receiver’s attorneys ask for the suit to be tossed so Unkovic can have a chance to develop his Recovery Plan.

TD Bank et al. have responded by proceeding with the suit full force. The apparent intention is to get a judgement in their favor before any possible interference from the Receiver and his plan.

While McKenna must keep up this fight against the banks and bond insurer, at the same time the firm’s Municipal Recovery & Restructuring Group attorneys are designing and implementing the process of evaluating, price-tagging, and settling the City’s major assets. The Receiver has been frank what these are—the Incinerator, the water system, the sewer system, and the parking system.

Besides being frank about this, Unkovic has been explicit on his conjecture for the asset liquidation process. By April, he expects to have values for the assets. By the end of June, he expects to close on any sales or leases. In between April and June, with concrete asset evaluations in his hand, Unkovic has told us he will embark on extreme negotiations with creditors and with the unions so he can develop “the package” that saves Harrisburg.

The Harrisburg recovery package, as if it is something to be neatly assembled, bundled, and presented.

The law firm of McKenna has keen expertise in Public Private Partnerships (P3s), i.e. the privatization of public assets. Not only that, but they have publicly lobbied for P3s in Pennsylvania. In fact in a recent press release on the launch of a pro-PA P3 blog called “Citizens for Rebuilding PA,”  Marcus Lemon of McKenna was quoted as saying, “Pennsylvania is the perfect state for successful utilization of private capital and innovative project delivery tools to improve its vast array of aging infrastructure such as highways, bridges, and water systems – with this effort providing the most effective vehicle for Pennsylvania to be on the cutting edge of this emerging opportunity.”

Such statements from Harrisburg’s Receiver’s attorneys are alarming, especially since McKenna seems to be the ones sketching the liquidation plan. Unkovic has stated he wants values of the assets by April then he will see which ones the City will need to sell or lease. He hasn’t yet contended all of the major assets listed will be liquidated, but he also hasn’t said otherwise. Of course herein lies the taxpayers’ greatest concern–is the City of Harrisburg merely to become a model of privatizing our revenues and socializing the losses? All in the name of public debt obligation?

This we won’t know on February 6th. This we won’t know for a few months.

May and June will be an intense time around here as the Receiver will be simultaneously negotiating with parties who want to buy or lease the City’s assets, with creditors, and with the unions. And all of this will occur as July 1, 2012 approaches, which is when the City’s bankruptcy timeout ends and Harrisburg’s Receiver could then legally seek to file Chapter 9 Municipal Bankruptcy.

Although it can’t be certain that McKenna was hired by the State to craft the deals always meant to be crafted, what we can be assured of is that Unkovic is the only one who can say, “Do this” to the Mayor, to City Council members, to Authority Board members, to the taxpayers. He’s the boss. It was David Unkovic who was given the court-appointed authority to be so. Not anyone else. Not McKenna attorneys. Not the Governor. Just Unkovic.

It’s his authority, his honor.

At one of his public forums he declared, “Ultimately from a legal point, I have certain powers over officials. I’m not interested in exercising that power arbitrarily or at all if I don’t have to.”

Yes, timing is everything. Those who are suspicious believe the timing could be in place to sink the City. Those who are hopeful believe the timing could be just right to propel the City forward.

Unkovic has said he doesn’t want to be here for long as the Receiver. “I want the City to buy into the solution and be involved in the solution, and ultimately take over the solution at the right time and run it.”

One thing is for sure, he doesn’t approve of how the City is currently run. He has called for a Chief Operations Officer for the City of Harrisburg. He defined it as “someone from outside who can come in and see how the city operates and get things going.” He remarked it has to be someone who will focus on goals “practically” because evidently he realizes Harrisburg doesn’t have that now in our leadership and hasn’t for a long while.

He indicated that the City’s capital needs are in desperate need of being addressed and improved upon, but that it would have to occur in a systematic order of prioritization. Again, something Harrisburg has lacked.

Unkovic announced change is coming. Perhaps the most significant thing he has said of his upcoming plan is, “In some ways, [it will require Harrisburg to] change the culture and change the focus of how the City operates.”

That’s the warning. To the Mayor. To City Council. To citizens.

That’s what we should be looking for in the Receiver’s Recovery Plan. We should be looking for what he’s telling us must change under his direction.

If we look for the details of his negotiations at this point in time, we’ll be missing the real meaning of Unkovic’s plan for Harrisburg.

.

Documents referenced in this article:

“Senate Bill 1151“

“1/23/12: The Law Firm for the Receiver Lobbies for P3s”

The Office of the Receiver–“Brief Opposing Motion for Mandamus“

.

Drawing by Ammon Perry: Doodletillomega: Illustrations and Drawings by Ammon Perry