Bankruptcy should remain Harrisburg's last course of action as the capital city works to get itself out from under a mound of debt, new receiver William Lynch said today.
In an interview with the Business Journal, the recently appointed fiscal overseer said having Chapter 9 municipal bankruptcy protection is an important tool in the city's kit, should it be necessary.
"I would prefer that the ban on bankruptcy imposed by the state Legislature is not continued," Lynch said.
As part of the budget process last year, state lawmakers prohibited the city from filing for bankruptcy until July 1 of this year. However, City Council members filed anyway, and a federal bankruptcy judge in November dismissed the petition.
The ban was prompted by Harrisburg's fiscal distress and lack of a recovery plan. It was aimed at all distressed third-class cities in the commonwealth.
Here is part of the interview with Lynch, who entered the fray last month. The 69-year-old is a retired major general who served in the Air Force. Lynch spent 40 years in the military, including serving as an air operations division director for the National Guard during operations Desert Storm and Desert Shield.
He also has been the adjutant general of the state under three governors.
Former receiver David Unkovic resigned March 30, citing "political and ethical crosswinds," which left Fred Reddig with the state Department of Community and Economic Development administering the office.
Harrisburg is dealing with more than $326 million of incinerator debt and annual structural deficits because revenue fails to keep pace with expenses.
Q: Do you believe the lack of a receiver for nearly two months delayed the process? What is your timeline to come back before the Commonwealth Court with an amended plan, and do you intend to do that once or bring items back as needed?
A: I have not developed a specific timeline of when we will go back to the court. There are certain requirements that the court has laid out. I believe we owe the court a report in 30 days and then in 60 days.
As far as whether or not things have been delayed, I think undoubtedly they have. Fred Reddig is an enormously talented individual who did a great job, but being the interim anything is a difficult situation. So I will submit that, although a lot of the work continued, there were decisions that were not made.
It's hard to quantify how much the delay is, but I would say, yeah, it delayed the process somewhat.
What is your biggest obstacle in this process — meaning who or what stands in your way? Is bankruptcy an option you might consider?
I don't know that I have a biggest obstacle in this. I think the biggest problem in this has been the delay. The problem increases geometrically as we delay.
Bankruptcy is always a possibility. I believe that bankruptcy is our last resort. I also believe that having that tool in our kit is an important asset. I would prefer that the ban on bankruptcy imposed by the state Legislature is not continued.
As far as the possible criminal side of this situation, do you want to see charges brought against those that had a hand in the financial deals? Is that a big deal for you at this point?
Fortunately, that's not in my charter. I believe that the people or the agencies of state and federal government, the attorney general and the U.S. attorney, have all of the information. I have not spoken with either.
If it's determined that criminal action is required, I certainly have no quarrel with that.
We cannot delay what we're doing to wait for somebody else to do something. There are people who give you all kinds of numbers about how much the debt increases on a monthly basis. My feeling is even if they're wrong by 50 percent, we can't live with it.
Even if the numbers are wrong by half, it's something you can't deal with. Any delay, in my opinion, is uncalled for at this point. To say we're going to wait until somebody else does something, it means that nothing gets done.
For more on the interview with Lynch, read next week's edition of the Central Penn Business Journal or visit cpbjnow.com.