News Around The Burg
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September 2010

Scott Balice May Be Out as City Financial Adviser

Sept. 28 -- The Thompson administration's effort to hire Scott Balice Strategies may have suffered a fatal blow tonight, as the City Council refused to dedicate state funds to pay for the services of the Chicago-based financial adviser.
By a 5-2 vote, the council amended several resolutions originally intended to direct state grants and loans to fund Scott Balice, a company that the administration wants to hire to help the city dig out of its crippling financial crisis. The amendments effectively re-opened the selection process, explicitly stating that the $850,000 in state aid should fund financial advisers that the council chooses.
In August, the Thompson administration announced the selection of Scott Balice to provide advice and solutions as the city grapples with an overwhelming debt load, mostly due to $288 million in bonds tied to the city incinerator.  
Ever since, a council majority has insisted that the choice was improper, stating that it was shut out of the selection process. The administration has repeatedly refuted the charge, asserting that it followed all regulations and procedures in selecting the company.
The meeting opened with a plea by Mayor Linda Thompson to the council to approve the resolutions that would fund Scott Balice.
"I'm here asking the City Council to take a step forward, a step that the commonwealth is willing to help pay," she said.
Council members have objected to Scott Balice on numerous grounds. In addition to concerns over the selection process, members have stated that they believe that the Scott Balice team, which includes the Bracewell & Giuliani law firm, is too close to Wall Street and would put the interests of bondholders above those of Harrisburg residents. 
Council member Patty Kim added a new objection tonight. She said that she met with representatives of Scott Balice and came away convinced that the company did not intend to draft a comprehensive plan to deal with the city's debt crisis, but would only offer a list of suggestions for reform, a tactic already employed, to limited effect, by the city's previous financial adviser, Management Partners Inc.
"I envision having a bunch of options on the table, and the council and mayor not being able to agree on them," Kim said. "Then we've wasted the money, and we're back to ground zero. I guarantee that will happen."
The council decision appears to put any effort to resolve the financial crisis back on hold. Meanwhile, the city and the Harrisburg Authority are being sued by creditors to force them to honor more than $35 million in debt payments that the authority has missed or that are due by Dec. 15. One of the lawsuits also asks the court to appoint a receiver for the authority to ensure that future debt payments are made.
In a separate resolution, the council voted 5-2 to authorize its Budget and Finance Committee to begin exploring the hiring of legal and financial professionals that could advise the council on both Act 47, which permits financially distressed cities to restructure their debt under state supervision, and Chapter 9 municipal bankruptcy.
To date, the administration has been strongly opposed to these moves, saying that other options should be tried first.  


City Workers to Get Paid as ADP Agrees to Process Payroll

Sept. 28 -- Harrisburg's municipal workforce will get paid on time this week, as ADP has agreed to process the city's $1.2 million bi-weekly payroll.
ADP recently informed Harrisburg that it could no longer provide payroll processing because the city owes the company $13,000 in back fees for its services. Mayor Linda Thompson issued a statement today that ADP would process checks so that employees could be paid on time.
“I want to recognize and applaud ADP’s decision to process and deliver the city’s payroll as agreed upon in the purchase order under which it serves the city of Harrisburg," Thompson said. "The company clearly recognized the consequences for the city’s workforce if checks were withheld and decided that seeking immediate payment for its services, even though lawful, could be devastating for many employees. I appreciate ADP’s compassion, consideration and priorities."
Since March, City Controller Dan Miller has refused to approve payment to ADP because he claims that the company operates without an openly bid contract. Furthermore, he says the administration has prevented him from contacting ADP over concerns he has regarding how the company plans to migrate from a paper-based to an electronic system of issuing paychecks. Specifically, he wants to make sure that, under an electronic payment system, he continues to have the ability to review and approve checks before signing them, so that he can verify that the amounts on employee checks match the amounts allocated.
Thompson has refuted Miller's assertions, calling them political. She said that ADP's services are fully accounted for in the city's budget. She also said that Miller is free to contact ADP for informational purposes, but that he lacks "the jurisdiction to contact ADP and instruct them to make changes to the upcoming payroll as he sees fit." She said that, according to ordinance, Miller must notify the city's business administrator if he finds an inaccuracy in the payroll.

Dispute over Payroll Processor Endangers City Paychecks

Sept. 27 -- A longstanding feud between Harrisburg's mayor and controller has re-surfaced, endangering the paychecks of the city's 577 full- and part-time workers, who are due to be paid on Wednesday.
Payroll processor ADP has notified the city that it will not process this week's payroll unless it gets paid $13,000 in back fees owed for its services.
This issue is separate from Harrisburg's ongoing financial problems. Instead, it originates from a dispute between Mayor Linda Thompson and Controller Dan Miller, who has refused to approve ADP's invoices.
In March, Miller said, Thompson prohibited direct contact between his office and ADP, preventing him from ensuring that his office will have the ability to continue to review and approve paychecks as the city migrates from a paper-based to an electronic-based payment system. He also said that no openly bid contract exists between the city and ADP, prohibiting him from legally approving ADP's invoices.   
Miller said he will not approve payment to ADP until the administration begins to address these issues. Miller also said that the city does not require the services of ADP, since it has the ability to process payroll internally.

School Board Seeks to Fill Vacancy

Sept. 23 -- The Harrisburg school district is seeking nominations to fill a vacancy on its nine-member board of directors.
The board expects to make the appointment at its Oct. 18 meeting, based upon a review of applications and a majority vote. The appointment expires Dec. 5, 2011, when the seat will be filled by the victor of the November 2011 school board election.
The board will accept applications to the non-paying position through 4 p.m., Oct. 5. Interested candidates should submit a cover letter and resume electronically in a PDF format to board Secretary Julie Mackey at jmackey@hbgsd.k12.pa.us. Additional requirements and information can be found at this site.
Board members will face a myriad of difficult issues this year, including how to close a yawning $6.8 million budget gap. District Operating Officer Shawn Farr already has proposed significant cuts to early childhood education and sports to close the deficit.
Residents can voice their opinions and concerns about possible cuts to school programs at four public forums. The first will take place tonight at Camp Curtin School, 2900 N. 6th St. The others are Sept. 28 at Foose School, Oct. 5 at Harrisburg High School and Oct. 7 at Ben Franklin School. All begin at 6 p.m.

Council Wants Concrete Figures on Financial Adviser Cost

Sept. 21 -- Exactly how much will it cost to hire Harrisburg's would-be financial advisers, Scott Balice Strategies?
That question headlined a meeting tonight of the City Council's administration committee, which wanted to ensure that Scott Balice wasn't on the receiving end of an open-ended financial commitment.
"I want to know what this is going to cost us," said Council President Gloria Martin-Roberts. "We can't provide an open contract with them."
Martin-Roberts said she wanted a firm idea of the final tab before she would agree to present resolutions to the council that would enable Scott Balice to get paid through grants and loans pledged by the state. 
Martin-Roberts' pushback came as a surprise to some in the well-attended committee meeting, as she sat on the search committee that selected Scott Balice and is regarded as an ally of Mayor Linda Thompson, the main advocate of hiring the company and its financial and legal teams.
So far, the state has pledged $350,000 in grants and another $500,000 in loans to pay Scott Balice. Tonight, city Finance Director Robert Kroboth revealed that the $500,000 loan, under terms written by the state, would convert to a grant if the city does not sell sufficient assets to cover the loan by June 30, 2013. Therefore, the state's obligation to pay for Scott Balice's services could rise to $850,000.
"That should be sufficient funding to get us where we need to go," said Kroboth.
Nonetheless, council members were concerned that the final tab could be well in excess of the $850,000 in state money, as the city's financial issues are extremely complex and will require Scott Balice and its team members to work long hours over an extended period.
Scott Balice plans to charge the city $20,000 a month for up to 65 hours of work. Work in excess of 65 hours a month would be billed on an hourly basis at rates of $275 per hour for work by both Scott Balice and the Jones Lang LaSalle real estate firm. The Bracewell & Giuliani law firm, another team member, would bill at $600 per hour.

Harrisburg Authority Back in Business as Lawsuits Threaten

Sept. 14 -- The City Council broke a logjam over the makeup of the Harrisburg Authority tonight, approving a third member to the body's board of directors.
The confirmation of lobbyist Westburn Majors gives the five-member board a quorum, allowing it to begin to tackle a backlog of business, such as approving contracts, paying vendors and dealing with pending lawsuits. The vote was 6-1, with only Councilman Brad Koplinski voting no.
The state Supreme Court nullified the board in late May, ruling that only the mayor has the right to make authority appointments, subject to council approval. In 2006, the council gave that power to itself, prompting then-Mayor Stephen Reed to sue the council.
The court's ruling led to a power struggle between the council and Mayor Linda Thompson, who refused to re-appoint three of the five members of the nullified board. Thompson eventually named 10 nominees, but only three were confirmed: Majors and former board members Bill Cluck and J. Marc Kurowski.
In a rare appearance before the council, Thompson made a personal plea for cooperation in resolving Harrisburg's financial crisis.
"I hope our shared concern for the city of Harrisburg will allow us to put our differences aside," she said.
A council majority, which has consistently opposed Thompson's budget and spending plans, finally decided to resolve the power struggle over the Harrisburg Authority, which runs the city's water and waste utilities.
The council's decision tonight was prompted mostly by two lawsuits filed Monday by the authority's creditors, trying to force the authority and the city, which has backed the authority's debt, to honor more than $35 million in debt payments that the authority has missed or that are due by Dec. 15. One of the lawsuits also asks the court to appoint a receiver for the authority to ensure that future debt payments are made.
In other developments from tonight's council meeting:
* City Finance Director Robert Kroboth said the city received $3.6 million from the state today to make a scheduled payment on its general obligation bonds due Wednesday. The money was part of a financing package announced Sunday to help Harrisburg meet its general debt obligation, which is separate from the Harrisburg Authority debt.
* The council took no action regarding paying for the services of Scott Balice Strategies, which the administration recently hired to help the city dig out of its debt predicament. The administration has proposed borrowing $500,000 from the state -- and kicking in another $350,000 -- to pay Scott Balice and its legal and financial teams.
* As the meeting closed, Councilman Brad Koplinski unexpectedly tried to move a proposal to explore hiring J. Gregg Miller of the Pepper Hamilton law firm to advise the city on possible municipal bankruptcy. His motion was ruled invalid due to a parliamentary technicality.

City, State Cobble Payment to Meet Bond Deadline

Sept. 12 -- Under an agreement with the state, Harrisburg will be able to meet a $3.3 million payment on its muncipal bonds due on Wednesday.
The package of loans, grants and expedited payments was announced at an unusual Sunday morning press conference held by Gov. Ed Rendell and Harrisburg Mayor Linda Thompson at the state Capitol.
The city also will receive $850,000 to help pay Scott Balice Strategies, a financial consultant hired by the city to help it dig out of its financial crisis. In all, the financing package totals $4.3 million.  
Most of the money -- $3.6 million -- originates from expedited payments for fire protection services and pension assistance that the city would have received from the state in the near future. The rest is made up of a community assistance grant and a loan from the state.
The package was cobbled together quickly, after the governor's office received word from the city on Thursday night that it could not meet its Sept. 15 bond payment. Rendell stressed that the agreement is not a bailout.
"Most of this is money due to the city of Harrisburg," he said. "We're merely front-loading and expediting it."
The $3.3 million payment is for the city's 1997 general obligation bonds. After the Sept. 15 payment, the next payment on that debt is due in March. This financing package has nothing to do with the separate $288 million in debt accumulated by the Harrisburg Authority for improvements to the city incinerator, debt that is backed by the city.

Mayor Presents Plan to Close Budget Gap

Sept. 8 -- Harrisburg Mayor Linda Thompson today proposed layoffs and furloughs of an undetermined number of the city’s 529 employees, closing one of four fire stations and raising parking meter fees to reduce the general fund’s more than $4 million deficit.
At an afternoon press conference, the mayor blamed “a bloc on City Council” for obstructing her efforts to reduce the deficit and allowing it to increase over the last few months. “Some of this city’s pain could have been avoided,” she said.
Thompson said this is the second phase of deficit reduction. She said the first phase was implemented earlier this year and realized a combined savings to the general fund budget of $4.5 million or 7 percent.
“We’ve already reduced personnel expenditures by imposing hiring restrictions, reducing the workforce through attrition, consolidating duties and reducing overtime,” she said, noting that, when she took office, the city had 584 employees.
Thompson blamed the council’s action to eliminate a water rate increase, which, in turn, reduced revenues to the city by $4 million, for the deficit and urged council to act as soon as possible in approving the deficit reduction plan.
The mayor’s plan also includes a parking tax increase, an increase in other fees as recommended by the city’s financial consultants, increased license permit fees and savings realized from not filling new vacancies created through attrition.
She also proposed the sale of 2005-2009 real estate tax liens and drawing down on the city’s Ambac Assurance Corporation Bond Insurance Policy to fund the debt service on Series D and F of 1997 General Obligation bonds, due Sept. 15.
Some of Thompson's proposals, such as selling tax liens, will require council action. In general, council members seemed receptive to the suggestions, as they were briefed later in the day by city Finance Director Robert Kroboth.
"It's new information for us, and it will take us a little while to mull it over," said council member Susan Brown Wilson, who rejected the charge that the council was to blame for the budget crisis.
Addressing council concerns, Kroboth said that he didn't envision a substantial number of layoffs, since the city, which has cut 286 positions since 2006, already is operating short-handed. Most likely, he said, the city would choose to furlough all management employees for one day each month and lay off several firefighters attached to the fire station that may be shuttered.
In addition, the city would like to fill three open positions for parking enforcement officers. These positions generate two to three times the revenue they cost, he said.

Expansion Planned for HACC's Public Safety Center

Sept. 1 -- Harrisburg Area Community College has plans to significantly expand the Shumaker Public Safety Center, including construction of a new Law Enforcement Center building and several outdoor facilities.
HACC presented its sketch plan tonight before the Harrisburg Planning Commission, a first step designed to unveil and explain major projects to commissioners.
The new, single-story, 47,000-square-foot center will contain classrooms, offices and an indoor firing range for law enforcement personnel, according to J. Marc Kurowski of Harrisburg-based K&W Engineers, who testified before the commission. Outdoor improvements will include a new driving track to teach emergency driving and a new drill field and physical training track.
Assuming the approval process goes smoothly, Kurowski expects the project to break ground in spring 2011, taking 12-18 months to complete. 
HACC long has hosted the Sen. John J. Shumaker Public Safety Center, a 12-acre facility that helps train firefighters, police, emergency medical technicians and other public safety personnel. It is located just north of HACC's main campus in Harrisburg near N. Cameron Street and Route 81.
At the same meeting, the planning commission granted a variance to the Harrisburg Senators to construct a 490-square-foot illuminated roof sign atop the stadium on City Island. The sign, which will be visible from the city side of the river, will say "Metro Bank Park."

CAT Fare Increase on Deck

Sept. 1 -- Capital Area Transit, effective Oct. 1, will increase the base fare from $1.65 to $1.75, according to CAT.
CAT’s last upped fares in July 2008, when the increase was 5 cents. The student fare also will go up, from $1.15 to $1.25. The zone fare will increase by 20 cents to 60 cents. The transfer charge will remain at 25 cents. The downtown fare will increase a quarter to 75 cents.
The increases are based on a fare study sponsored by the Harrisburg Area Transportation Study. Some of the study’s recommendations will be implemented along with the fare increase.
These recommendations include realigning CAT’s current four zones into three zones, eliminating the 25-cent express surcharge and the 25 ride ticket, which will not be sold after Sept. 30 -- current tickets will be honored.
“The cost of providing quality public bus service continues to increase,” Jim Hoffer, CAT’s executive director said. “This modest increase in fares will assist CAT in continuing the service that our customers have become accustomed to. The zone changes will simplify using the CAT system.”
Prices of adult and student monthly passes also will increase. The Zone 1 pass will be $49, the Zone 2 pass will be $70 and the Zone 3 pass will be $87. The student pass for grades K to 12 with proper ID card will be $35. The Special Efforts Transportation and the People with Disabilities Program base fare will be $3.50.