City officials last year waited and then debated the road to recovery. Ultimately, a stalemate led to state receivership and a process that should be decided soon with David Unkovic's initial plan in the possession of the Commonwealth Court.

Unkovic, a municipal finance expert and former chief counsel at the state Department of Community and Economic Development, was appointed by the court in December as Harrisburg's receiver.

Meanwhile, businesses continued to open in 2011 in Harrisburg, and outside vendors still were flocking downtown.

A look at last year's business accounts found the city generated more new businesses than lost existing companies (see "Business accounts come and go in Harrisburg," this page).

"I cannot worry about the local politics," said K. Jameson Lawrence, CEO of Baltimore-based BVFR & Associates, a financial services and investment banking firm that recently moved its Lemoyne office to North Second Street near the Governor's Residence.

"If I was a betting man, my guess is that the mayor will get together on a plan to do whatever is necessary to revive the capital city."

While his business is not so much location specific as it is niche-driven, the visibility of a Harrisburg address and vast opportunities to network are too good to pass up, said Lawrence, who had his eye on a move to Harrisburg for several months.

Taxes, as well as parking fees and utilities, generally are higher in the city, but the opportunity to do more business because of the location offset those concerns, said Lloyd Lamm, regional banking executive for First National Bank of Pennsylvania, which is moving its regional headquarters into Harrisburg from Susquehanna Township.

"We looked at all the factors and believe the business opportunities, exposure and location mitigates that," Lamm said as First National prepares to move into the building at Second and State streets being developed by Harrisburg-based WCI Partners LP.

The five-story building, which is expected to be complete by July, is going up near the state Capitol.

First National Bank of Pennsylvania, the largest affiliate of Mercer County-based FNB Corp., will occupy about 14,000 square feet on the first and second floors of the 50,000-square-foot building, while the law firm of Buchanan Ingersoll & Rooney PC will occupy about 32,000 square feet on the top three floors.

The additional 4,000 square feet of office space remains available on the second floor, WCI President David Butcher said.

About 40 bank employees will work out of the new regional headquarters. Once completed, the office building will be home to 110 permanent employees, the developer said.

Harrisburg will get stabilized in the long run, Lamm said, adding that the bank is not deterred by the city's debt woes. As of December, the city had more than $317 million in incinerator debt. That number goes up about $1 million every month.

"It's like everything else in business. It's give and take," Lawrence said about the added costs.

Lawrence said he doesn't mind having to pay more in taxes and other fees if he has happier, more visible employees.

Downtown still is attractive to people who want to be centrally located to other businesses they meet with often, particularly near the Capitol, Butcher said.

In addition to the highly visible construction project at Second and State streets, the developer has led the neighborhood revitalization effort in the city's Olde Uptown area in Midtown.

The ongoing Olde Uptown renewal also has included the purchase and renovation of two commercial office buildings on North Second Street — one of the properties BVFR & Associates now calls home.

"Everyone makes their own calculation," Butcher said about businesses relocating to the city.

The Capitol location always will be a draw for businesses, said Roy Brenner, associate partner of the office services group at East Pennsboro Township-based Landmark Commercial Realty Inc./Oncor International.

Landmark gets a lot of calls for short-term leases downtown, especially from lobbyists and law firms, Brenner said. Being a big election year with the presidential race and many state races, the phones have been ringing more lately, he said.

"These associations tied into politics have to have a presence," he said.

Between December 2010 and 2011, the unemployment rate in Harrisburg dropped to 9.8 percent from 11.3 percent, according to the state Department of Labor and Industry's Center for Workforce Information and Analysis.

In December 2010, the labor force in Harrisburg totaled 22,300. A total of 19,800 were employed, the Labor Department said. This past December the labor force dropped to 22,000 but total employment held at 19,800.

Labor force numbers drop due to retirements, people moving out of the area for work or they stopped actively looking, said William Sholly, an industry and business analyst.

Business accounts come and go in Harrisburg

The capital city picked up 558 new business accounts in 2011. Of those, 214 were city-based and 344 were outside contractors coming into the city to do business, according to Harrisburg's Tax & Enforcement Office.

As of Feb. 3, the number of closed business accounts in 2011 totaled 85, including 31 city-based businesses.

"This data continues to evolve as I receive the 2011 tax returns that are due on or before April 15," said Michael Hughes, the office's administrator. "The businesses closed number will go higher as businesses filing the final tax return report this to me."

In 2010, 396 accounts were closed, he said. At the same time, 670 new business accounts were added in 2010, including 215 city-based accounts.

"I spent a lot of time on the street bringing businesses into compliance that had slipped by in previous years," Hughes said about 2010, his first year in the office.

The number of new business accounts declined in 2011 because many outside contractors were brought into compliance in 2010, he said.

Harrisburg does not track where a business came from or where it goes after closing an account, said Robert Philbin, a city spokesman.

"The objective is steady growth in business development and family-sustaining jobs," Philbin said. "The city anticipates further business development growth in the coming year and will work with (the Harrisburg Regional Chamber and Capital Region Economic Development Corp.) and other economic and business groups to both attract businesses from outside the city and help develop community businesses within the city."

Receiver's recovery plan in summary

Harrisburg receiver David Unkovic on Monday submitted his initial recovery plan to the Commonwealth Court to address the capital city's debt crisis.

Key points of the plan:

• Sell or lease city assets, including the incinerator and parking facilities. Unkovic also wants to look at the management and operation of the water and wastewater assets.
• The receiver's plan calls for a 30-day period for requests for qualifications and proposals to determine interested parties. With the advice of the relevant authority, Unkovic expects to enter into negotiations and determine the value of city assets by April and close on transactions by June. Chapter 9 would be a possibility if those transactions fail to occur.
• Concessions are needed from the three city unions to address the structural deficit.
• To improve day-to-day operations, the city should fill a chief operating officer position to lead the plan's implementation.
• New revenue sources are needed to close the deficit gap. The recommendations include a 1 percent increase in the resident earned income tax, service efficiencies and additional revenue from fees and outside sources. Increasing business license fees and improving compliance with the Business Privilege & Mercantile Tax are a few of the revenue generators.
• The plan maintains the approved property tax hike of 8 percent.
• Regarding the Harrisburg Authority's recently released audit of the incinerator debt, Unkovic said he has retained counsel to determine pursuit of any civil action. The report focuses on financings in 2003 and 2007 and related interest-rate swaps.

Harrisburg mortgage foreclosures fall, tax delinquency up

Properties in mortgage foreclosure, 2010: 186

Mortgage foreclosure, 2011: 138

Properties that went to tax sale for delinquency, 2010: 108

Tax sale for delinquency, 2011: 182

Source: Dauphin County Recorder of Deeds