Pennsylvania city's receiver warns on revenue need

Reuters News
Posted: Feb 06, 2012 3:23 PM
Pennsylvania city's receiver warns on revenue need

By Mark Shade

(Reuters) - The state-appointed receiver for Pennsylvania's capital of Harrisburg warned that the city will likely face ongoing budget problems even if it sells its incinerator and parking garages.

Receiver David Unkovic, in his 194-page proposal, said he has not yet determined the value of Harrisburg's parking garages, incinerator and other assets.

However, he said, "It is not clear to me at this stage of the plan development process that, without additional new revenue sources, the city can achieve a balanced operating budget even with further belt-tightening and meaningful concessions from labor."

Harrisburg is more than $317 million in debt because of expensive repairs to its trash incinerator. A forensic audit released last month showed Harrisburg was drowning in red ink because a close-knit group of high-ranking public officials failed to vet the repair and retrofit of that facility.

Unkovic said he anticipates the proceeds from any sale of the incinerator would pay debt related to that project. But even without the incinerator, he said the city would be facing operating budget challenges.

Harrisburg and other cities in Pennsylvania are "constantly living on the razor's edge," he wrote. "They have no seed capital to work their way out of problems." He suggested a local county sales tax might benefit the county and the city.

Harrisburg is facing an annual operating budget gap of $11 million, which includes the debt from the incinerator and other costs, Unkovic said, adding that concessions from labor unions, an increase in the resident earned income tax, and other fees would be necessary to close that gap.

Unkovic said he would submit the second half of his proposal once he determines the value of the city's assets.

Were the parking assets to be sold, the proceeds would first be applied to the existing debt of the Harrisburg Parking Authority. The rest could help pay a portion of the incinerator debt "and to contribute over time to address a portion of the city's structural deficit," he wrote.

Robert Philbin, a spokesman for Mayor Linda Thompson, said:

"The mayor is happy the plan is finally public and she said she will review the plan in detail and comment later in the week."

Unkovic admonished city officials to talk to each other more regularly and to cooperate in good faith.

"These two management changes seem simple but they are vital to the recovery of the city. It is important that the elected officials behave cooperatively and be perceived as behaving cooperatively," he wrote.

(Reporting By Mark Shade; Editing by Leslie Adler)