By David Gaffen and Mark Shade
Harrisburg, Pa (Reuters) - The receiver appointed to oversee the finances of cash-strapped Harrisburg, Pennsylvania, unexpectedly resigned after just four months on the job, throwing into disarray plans to help the city deal with its debt problems.
David Unkovic was appointed in December to help Harrisburg, the state's capital, work through $317 million of debt incurred by cost overruns from the upgrade of the city's incinerator.
This week a court ruled a second receiver was needed, solely for the incinerator, in addition to Unkovic who was the state appointed receiver for the city.
There were concerns the additional receiver would complicate Unkovic's job.
Unkovic's resignation follows two days after he said he had asked U.S. and state attorney generals to investigate an audit that found high-ranking public officials failed to vet repair costs for the incinerator.
Unkovic walked into Pennsylvania's Commonwealth Court unannounced on Friday morning and handed in his resignation, according to a source familiar with the matter. His departure highlighted divisions between the city and the state. Harrisburg officials blamed Governor Tom Corbett's administration for Unkovic's resignation.
"The stress and the pressure likely got to him. Pressure has been building up the past few weeks," said John Campbell, Harrisburg's city treasurer.
Across the United States, a growing number of cities and counties, from Detroit to New York's Suffolk County, are experiencing troubles dealing with their budgets. Problems range from lower income and property taxes to increasing costs for public employees or the cost of servicing heavy debt.
A federal judge last year ruled Harrisburg could not file for bankruptcy to help resolve its debts. Pennsylvania appointed Unkovic to find alternatives.
Unkovic settled on the sale or lease of city assets to generate cash. The move met opposition from Harrisburg's city council and community groups which favored bankruptcy.
In Harrisburg, Unkovic was not available for comment. Harrisburg's mayor Linda Thompson said she spoke with him on the phone. She did not provide details.
"Our city's future is at stake in all of this but now we must move on. It doesn't stop the show. It doesn't cause any setbacks," said Thompson.
Neil Grover, attorney for Debt Watch Harrisburg, a citizens' group that has favored bankruptcy, but worked with Unkovic, said the receiver was forced out due to his approach.
"He was trying to do the right thing, trying to be balanced and even-handed and, you know, the powers that be could not tolerate that," Grover said.
A spokesman for Governor Tom Corbett said the governor was going to quickly identify another receiver to recommend for court approval. Pennsylvania Department of Community and Economic Development spokesman Steven Kratz called the resignation "unexpected," saying Unkovic was not forced out.
The city was in the process of identifying a buyer for its incinerator and exploring the sale of its parking garages and water and sewer system to make cash.
Generating cash is of paramount importance for Pennsylvania's distressed capital which in March skipped $5.3 million of debt payments.
"These politicians up on the state capitol, and in our county, want to sell our assets as soon as they can and get as much money out of it so it harms them the least before we go into bankruptcy," said Dan Miller, Harrisburg's city controller, who is running for mayor. "Unkovic understood all of this. And he was giving the truth about the bad situation, and these guys don't want to hear that."
Mayor Linda Thompson said the order to appoint a second receiver was a "setback in the process we don't need."
Unkovic, in response to the judge's order, said he was going to go ahead with the sale or lease of the incinerator.
"He came to the conclusion that it was the bad guys he was expected to side with," said Mark Schwartz, the attorney who represented the city council in its push for bankruptcy.
He had little hopes for Unkovic's replacement.
"What I expect is the governor will appoint some hatchet man to protect those parties that profited from all of these bond issues that shouldn't have been done in the first place."
(Reporting By Mark Shade in Harrisburg; additional reporting by Ernest Scheyder in New York; Editing by Andrea Evans, Dan Grebler, Bernadette Baum, Andrew Hay)