David Unkovic, the former chief counsel at the state Department of Community and Economic Development, entered the fray last week as the city's appointed fiscal receiver.

The Montgomery County resident said he believes he will be able to pull the capital city out of the fiscal ditch that includes $317 million of incinerator debt and annual structural deficits as city revenue fails to keep pace with expenses.

Unkovic, 57, has been appointed for a period not to exceed two years, subject to extension under the recently amended Act 47 law. He will remain on the commonwealth's payroll at a salary of $125,008, the same salary he started with upon accepting the position at DCED.

The Business Journal on Tuesday spoke with Unkovic about stepping in as the first fiscal receiver in the history of the commonwealth's Act 47 distressed cities program, his approach to crafting a recovery plan, working with Harrisburg leaders and the next piece of this state intervention.

Q: How did your name come up in this receivership process and why did you agree to take on this role? What's in it for you?

A: I don't know a lot about the selection process other than I was willing to do it. I took it because I care about the state. I have lived in Pennsylvania my whole life. I grew up in the western part of the state, working mostly in Philadelphia but also in Harrisburg. My practice as a public finance lawyer took me all around the state. I care a lot about the whole state and I care a lot about the cities in the state.

I think the situation with Harrisburg is very important when you look at the challenges that other cities in the state also have. My whole career has been based working with fiscal problems and challenges of local government, so I would like to do this.

In your long career in public finance, what would be a comparable situation to Harrisburg's financial challenge and how did you advise that client, or what was the resolution?

There are lots of things that are similar. There is certainly nothing comparable to this. A municipality has never gone this far in Act 47.

I've dealt with situations where governments have been in distress. For example, I worked on a transaction as underwriter's counsel on a bond issue for Chester Upland School District in southeast Pennsylvania. That school district has had an oversight board for a long time. It doesn't currently, but it still has great financial challenges. I worked for two years on trying to structure a refunding bond issue to provide some refunding relief and also some money for capital projects there.

I also was involved early on in the School Reform Commission in Philadelphia when that oversight board was put in place. I worked on the very early stages of setting up how that School Reform Commission would work and how it would oversee the (School District of Philadelphia).

I've also worked with other municipalities that have had challenges over the years.

Where are you in the development of your recovery plan for the city, and can you say anything about what will be in it or not in it? Is there any model?

I'm looking at the two plans that were done this year: the coordinator's plan and the mayor's plan. I'm also open to input from everybody who is interested in the situation. From the time I got nominated by the governor, I've been calling interested parties in the city.

I've had preliminary calls with the three unions, or in some cases meetings, and with elected officials. I've met with the city controller, talked with five of seven council people and of course spoke with the mayor. I've had calls also with county representatives and some representatives of the creditors. I'm going to have further discussions and negotiations with all of those groups going forward.

I can't tell you exactly what's going to be in the plan because I'm open to lots of suggestions. For example, I met with Debt Watch Harrisburg group for a couple of hours to answer their questions and listen to what their proposals are. I'm basically open to what ideas people have, and I'm going to develop plan based on what I think is best for the city and the state.

How quickly will you look to implement an approved plan and what might be the first phase? How long do you see this process — that is, until solvency — taking; and realistically, what does that process look like?

In the short run, I have until Jan. 3 to file a plan, which will be the first business day in January. I anticipate probably filing it on Jan. 3, but not sooner than that. Under the statute, the court has 30 days to hold a hearing. Once they hold a hearing, they have 30 days to act on the plan. I think once I file a plan, I'm sure there will be lots of comment and there will be a public hearing. That process will work itself through and eventually the court will approve a plan.

How long the whole process will take?

I don't know. I can't say. I don't want to make a prediction on how long it's going to take. I can say that we'll move as quickly as possible, but it's a complex situation and there are a lot of issues to be dealt with and some of them are going to take more time than others.

How can Harrisburg businesses and residents trust that you will do what is in the best interest of the city, not just in the short term but that decisions you make will help produce a sustainable city government?

I'm not interested in solutions that are short-term solutions. I am very interested in the long term as well as the short term. The long-term solution is going to take a lot of cooperation and action by others other than the receiver, too. I think the plan will have aspects that might call on others to do certain things, too.

So, it's not just a matter of a receiver coming up with a plan and that's it. This thing is going to be a process. It's going to be organic. It's going to require elected officials and employees and community groups, the chamber of commerce and lots of entities, to chip in and turn the city around.

How much leash do you give the City Council and the mayor, or how critical are they to the plan, and what happens if they continue to be at odds? Are any of the fiscal decisions going to be theirs to make?

The elected officials are still in office under the statute, and they still have the powers and the functions that they normally have. The difference is that the receiver has the ability to develop the plan and implement the plan. The items that are in the plan, the receiver is going to have the power to make sure that those things do get implemented.

It's going to be a process of working with the public officials. I have a lot of respect for all of them, and I certainly respect their offices and that they were elected by the citizens of Harrisburg. I'm going to try to fully engage the elected officials and have them do their jobs as they normally would, but I'm also going to be another person at the table in the mix in terms of getting things turned around.

I have the power to implement the plan through the Commonwealth Court, which approves the plan. Like in any other situation, there is a difference between the power and how you use the power. I think the best course of action is to get buy-in from the officials and all the stakeholders in the plan and try to move forward in a cooperative manner. That will get it done the fastest and the best.

Beyond this week, what is next for you in this developmental phase?

I've contacted a lot of people already for initial conversations, so with a lot of them it's going to be follow-up with longer meetings and discussions. I also am working on aspects of the plan.

I met for a long time with McKenna Long & Aldridge, the firm that is a consultant for me, and (we're) doing a lot of strategizing on all the issues. I'm also going to be working closely with the consultants that DCED has, which will include The Novak (Consulting) Group, the Pennsylvania Economy League and to some extent, Stevens & Lee. Those (are the) consultants who have been active in this whole Act 47 process and also discussing things with them, meeting with them and having them work on stuff, too.

I'm still in the stage now where I'm mostly talking with people and doing some preparation. As time goes on, there will be more and more on paper, but right now there is not a lot.

Do you expect it will be a reasonable plan that the court will approve fairly quickly so you can get moving on the implementation phase?

I think it will be. The court will be part of the process. This is unprecedented. I assume once I file the plan that a lot of interested parties will make filings with the court with comments on the plan. That will get taken into account at the hearing, where I'm sure I'll present the plan and other people will present comments on it. There will be some process between there and when the court actually approves it.

Ultimately, the court is going to have to be satisfied with the plan. I'm confident the plan will address the major issues that have been addressed in the prior plans and that everyone has been talking about and trying to deal with. I think the court will find it as a comprehensive plan.

Business leaders see Harrisburg receivership as step in the right direction

Federal lawsuit aims to block fiscal decision-maker from selling city assets

Harrisburg's road to fiscal recovery has been anything but a smooth ride due to the divisive action between city leaders.

However, the roadblocks in addressing the city's debt crisis might have finally been negated with the appointment of a state receiver, city business leaders said.

"I think we view the city's receivership in a generally positive light, meaning the situation is finally heading in the direction of a workable solution to the financial crisis," said Brad Jones, vice president of community development for Harristown Development Corp.

Commonwealth Court Senior Judge James Kelley on Dec. 2 appointed David Unkovic as the fiscal decision-maker for Harrisburg, giving him 30 days to craft a recovery plan and submit it to the court for approval.

Mayor Linda Thompson and the City Council still would have a voice as elected officials, but fiscal decisions will ultimately be made by the receiver following the court's approval.

The recently amended Act 47 law requires the court to hold a hearing on the receiver's plan within 30 days of receipt and confirm a plan within 60 days of receipt.

When a plan is confirmed by the court, a four-member advisory committee would be established to include the mayor and the council president, an appointee of the Dauphin County commissioners and an appointee of the governor.

That advisory panel would be expected to meet with the receiver at least twice a month and would be consulted before the receiver exercises certain powers and duties, according to the law.

The appointed receiver may petition the Commonwealth Court to issue a writ of mandamus if the authorities and elected officials fail to undertake the actions of the approved recovery plan.

"I think it does instill confidence that there is clearly someone in charge," Dave Black, president and CEO of the Harrisburg Regional Chamber & CREDC, said about the receivership process.

Calling the state takeover very good for the business community, simply for moving the process forward, Black said he believes Unkovic will be the straight shooter he professed to be upon his nomination to the post. He said he expects a reasonable plan that can be executed quickly.

"I think there is a lot of relief in the local business community that we're going to see some action," Black said. "The current elected officials in city hall have not been able to arrive at any consensus over the last two years."

A sales agreement on the incinerator to address a large portion of the debt would be another positive message in the recovery process, Black said.

Any asset deals could be in jeopardy, however, if a federal lawsuit filed on Dec. 1 by three Harrisburg residents moves forward.

In the suit, the Rev. Earl Harris of St. Paul Baptist Church, city firefighters' union President Eric Jenkins and former mayoral candidate Nevin Mindlin argue that the legislation creating the receivership option, Senate Bill 1151, was a "special law" that singles out Harrisburg.

The legislation should be declared unconstitutional on the basis it violates the rights of city residents to due process of law and equal protection, said Paul Rossi, the attorney for the plaintiffs. It strips away representative democracy, he said.

The suit also argues the law unlawfully removed a commuter tax from the city's toolbox as a way to generate additional revenue. Other Act 47 cities, including Reading, have implemented the tax.

The suit wasn't filed to prevent Unkovic from being appointed receiver, Rossi added. The plaintiffs are hoping for an emergency restraining order that would prevent the sale of Harrisburg assets, he said.

Their concern is that Harrisburg will be stripped of its income-producing assets for a quick payoff.

If the receivership legislation would be deemed unconstitutional by the court, the commonwealth and its receiver would not have the power to authorize the sale of assets, Rossi said.

What happens to the incinerator and city parking garages, along with other assets, should be up to the elected city officials, he said.

How Harrisburg got to this point

Before Harrisburg was in state receivership, city leaders had multiple opportunities this year to pass a recovery plan as a distressed municipality under the state's Act 47 program.

The City Council in July rejected a state-sponsored Act 47 team's plan for the struggling capital city.

Mayor Linda Thompson's alternative proposal was shot down in August, and the council opted not to reconsider its vote on that plan in September.

In October, Gov. Tom Corbett signed into law Senate Bill 1151. The legislation gives the governor power to declare a fiscal emergency to ensure a third class city's vital and necessary services are funded should its officials fail to approve a recovery plan under Act 47.

Corbett declared the fiscal emergency and then followed up by directing the secretary of the state Department of Community and Economic Development to petition Commonwealth Court for a fiscal receiver for Harrisburg.

Senior Judge James Kelley on Dec. 2 appointed David Unkovic to the post. He has until Jan. 3 to file a plan with the court.

More about Unkovic

Before being named fiscal receiver for Harrisburg last week, David Unkovic was chief counsel of the state Department of Community and Economic Development.

The 57-year-old Montgomery County resident has 32 years of municipal finance experience.

He spent 27 years at Saul Ewing LLP in Philadelphia. The firm represents Assured Guaranty Municipal Corp., the primary bond insurer of the city's incinerator debt along with Dauphin County.

Unkovic also worked for PFM Asset Management LLC in Harrisburg from 2006 to 2008. PFM represented the county in incinerator debt financing. In addition, he represented RBC Capital Markets, a subsidiary of the Royal Bank of Canada, based in Toronto. RBC was an underwriter of the incinerator debt.

Before his July appointment as chief counsel at DCED, Unkovic worked at Cozen O'Connor, the Philadelphia-based law firm the state hired to fight Harrisburg's recent bankruptcy petition. He was not involved in that case, which a federal bankruptcy judge dismissed.

He said at his appointment hearing before Commonwealth Court on Dec. 1 he has no connections to any of the financial deals involving Harrisburg's incinerator. In the case of Saul Ewing, he said he left before AGM retaining the firm.

Unkovic is a lifelong Pennsylvania resident. He is married and has two college-age children.