Moving forwardNew receiver talks delays, goals for Harrisburg's recovery process
Focusing on the job at hand — fixing Harrisburg's lingering debt crisis — should not be a problem for recently appointed receiver William Lynch.
The retired Air Force major general only has to look out his fourth floor office window in the state Finance Building and the mission becomes clear. His view: the Pennsylvania Judicial Center.
Just a few short weeks ago, a Commonwealth Court judge in that very building appointed Lynch as the capital city’s fiscal overseer. He replaced municipal finance expert David Unkovic, the first receiver, who resigned from the post at the end of March.
It’s also the building where the commonwealth’s former adjutant general could be spending more of his time as he amends the confirmed recovery plan developed by his predecessor.
The Business Journal sat down June 7 with Lynch, 69, to talk about his approach to this unique position, which city politicking over plans to address the debt helped create last year.
The discussion also focused on the delays since the Office of the Receiver was conceived; the impact of late city audits; future asset deals to help quell the debt burden; bankruptcy; criminal investigations; and Lynch’s long-term view of Harrisburg.
Harrisburg is saddled with more than $326 million of incinerator debt and annual structural deficits as city expenses have outpaced revenue. The plan developed by Unkovic and approved by the court calls for selling the incinerator, leasing its parking garages and bringing in an outside party to manage water and wastewater assets.
Unkovic’s resignation left Fred Reddig, executive director of the Center for Local Government Services at the state Department of Community and Economic Development, as the temporary administrator.
Q: What are you doing differently to move this process closer to a resolution?
A: My predecessor did a great job crafting what is now a confirmed plan. That plan is pretty broad in some aspects and the concept is that as we narrow down the details and get more specific, we will modify the plan. Each modification must be approved by the Commonwealth Court, so the plan, although it’s confirmed and in place, is capable of modification.
We have a laundry list of things — actions we have recommended (the city government) take. I have the ability to go back to the court and force those actions. My immediate predecessor (Reddig) was an interim. Since he was not the receiver, he did not have the same powers (and) abilities that I have.
One of his requirements was to inform the court of actions required of city government in the confirmed plan that had not been completed.
If we have to, we can go back to court seeking a judgment from a Commonwealth Court judge that will enforce those actions. We’re in the (process) now of deciding if that’s the best avenue to take. I would much prefer that there be some kind of cooperative atmosphere between city government and this office, so we can get things done in a collegial fashion rather than an adversarial fashion.
Do you believe the lack of a receiver for nearly two months delayed the process? What is your timeline to come back before the court with an amended plan, and do you intend to do that once or bring items back as needed?
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.
How are the late city audits factoring into negotiations and getting to a resolution?
When you say that we have yet to complete the audit of 2009, people look at you like you’re crazy. I think the worst aspect of that is an indication of a city government that has, for some reason, not been tending to business. Those are fairly basic things. There are mechanisms in place that we have tried to help with where we believe the 2009 audit will be completed, perhaps as soon as this month.
The next issue is 2010, which I am told is more difficult and will consume a couple of months, depending on what they find.
And then we’re talking about 2011 and the current year, and I think our most difficult challenge with that will be putting mechanisms in place where the city will complete those kinds of things in the normal course of business. And I think that’s the biggest place where we can help — that kind of capacity building in a technical area that will make things happen in the normal course of business.
Can you talk about how active you have been in negotiations regarding the city’s primary assets?
I have not negotiated with anybody at this point, because we’re not there yet. There is a process for determining the eligibility of prospective buyers, and that process is working along. It’s more advanced with the incinerator. It’s down to a couple of potentials, and we will engage with those people when that’s appropriate and timely.
The other facilities — the numbers of potentials are in the process of being evaluated and brought down to a manageable number.
Does that need to happen at the same time as debt talks with creditors?
I think that’s all part of a process that happens, perhaps, concurrently. Until we know or we think we know the value of some of these assets, it’s hard to go to others and say there is a delta here of “X” amount, and we’re concerned with that.
Quite frankly, we’re seeking ideas on how to close that delta.
The answer is that we’re working now on valuing and then establishing what that delta is. It’s hard to do this when it’s all speculative.
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.
In a year or two years, whenever your time is up as receiver, what will be the outcome of this mission? Where do you see this city’s finances and reputation after plan objectives are executed?
I think the city’s reputation is of paramount importance here. And I think that Harrisburg is not just some other Act 47 city. I don’t even like the term “third-class city.” I think Harrisburg is a first-class city, and I realize there is a definition there that I’m ignoring.
I think that Harrisburg is unique in that it’s not just the citizens of Harrisburg. Every one of us in the commonwealth calls Harrisburg our capital city, and I think we ought to be proud of it.
So, what is my pie-in-the-sky hope for the future? And by the way, hope is not a course of action. I would like to see us emerge from this with a city government that works, with a city government that has an income stream that makes it possible to provide normal city services to its citizens.
But more important than that, I want city government with an attitude and a concept of how important it is to be our capital city, and all of the good things and — don’t misunderstand — all of the bad things that go with that.
I think there is a great opportunity here for seeking cooperation from surrounding counties and municipalities.
How does this role compare to your past leadership positions, and why did you want this job at this point in your life?
There are lots of people that have asked that, obviously. My only real answer is a former governor once said to me that if good people don’t run for office — and I’ve extended that, and do things like this — then our communities and societies are in trouble.
And I really believe that.
I also think that what is required here is somebody that can get the puppies on the paper and move this on, rather than a person with deep in-depth knowledge of bonds, surety guarantees and things like that. I think it’s astounding how much has gone on here, and I think if one were to get bogged down in the details of every nuance of this, you wouldn’t have time to sort of step back and take a look at the big picture and see how the pieces fit together.
There is a lot of misinformation and preconceived notions out there. It’s astounding to me how many people think they’ve got a handle on it and they really don’t.
Have you made any changes to the plan approved by the court?
No. Make no mistake, Dave Unkovic is an incredibly intelligent, talented guy. And the work he did, I believe, is remarkably well done. It’s not something that I will change on a whim or I will change just to make it my own.
How would you describe the power you hold over city officials when it comes to financial decisions and follow through?
My role is to see if we can create an atmosphere where it’s possible for city government, the people in city government, to work their/our way out of this problem. If necessary, I think it’s (Section) 709 of Act 47 that gives me a laundry list of powers — bankruptcy being (one) — that I can use to enforce that.
The way to actually make somebody do something is by going to the court and seeking the appropriate legal action to force action from city government. Our preference is that city government continue to act as city government and run the city. It’s not our role to displace city government, except in areas where it’s deemed to be absolutely necessary.
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.
Do you think businesses will want to be here and invest here in the future?
A downtown Harrisburg that’s a ghost town is not in anybody’s best interest. We have to foster a climate where businesses and people want to be here.