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News Around The Burg
October 2011

Mayor, Council Talk, Bid for Last-Shot Deal

Oct. 31 -- Harrisburg's elected officials swatted around ideas tonight on how to tackle the city's financial crisis during the first consent agreement meeting aimed at averting a state takeover.
The 2 1/2-hour discussion between Mayor Linda Thompson and all seven City Council members was at times heated, but mostly respectful, as they groped for common ground in a last-ditch effort to reach consensus on a financial solution for the city.
"My goal here tonight is to keep my mind as open as possible because I don't want a state takeover," said Thompson.
The meeting was mandated by state legislation that gives the city one final try at reaching consensus before Gov. Tom Corbett petitions the Commonwealth Court to appoint a receiver, who would force a financial solution on Harrisburg. Over the past few months, the council has rejected financial recovery frameworks three times by identical 4-3 margins.
In the end, the feuding sides agreed to meet again on Nov. 7. They also agreed that, going forward, they would use the original Act 47 plan -- not a later version submitted by Thompson -- as the basis for further discussion.
To forestall a state takeover, the sides must approve a consent agreement by Nov. 14, which then would be forwarded to the state Department of Community and Economic Development for approval, said Fred Reddig, executive director for local government services at DCED.
Also on Nov. 7, the city is due to have a meeting with AGM, the company that insures most of the estimated $310 million debt linked to the city incinerator. A council majority has insisted that AGM negotiate and possibly make financial concessions to relieve the city of some of its incinerator-related debt.
Tonight, Councilman Brad Koplinski asserted his belief that a fair resolution would include Harrisburg assuming one-third of the debt, Dauphin County one-third and AGM one-third.
The county strongly advocated improving the incinerator and actually is second guarantor, behind the city, for about one-half of the incinerator debt. AGM, Koplinski said, knew that the Harrisburg Authority's incinerator bonds were extremely risky -- so much so that both the city and the county had to back them -- but insured them anyway.
To date, AGM has indicated no willingness to accept less than the full value of the bonds it has insured.
Council members reiterated other items they'd like to see in a financial recovery solution, including a county-wide sales tax and a commuter tax. The state seems unlikely to allow either.
The state also has prohibited municipal bankruptcy for Harrisburg, but the council has filed for bankruptcy anyway.


Developer Eyes Kunkel Building for Apartment Conversion

Oct. 26 -- A Harrisburg developer is eyeing the nine-story Kunkel Building, downtown at 301 Market St., for 50 multi-family apartments.
Daniel Deitchman, who restored Riverview Manor and is now restoring the Furlow Building in Midtown, has filed requests with the city’s land use boards to convert the 38,522-square-foot commercial office building into residential units.
If the city agrees, the project would put residential living in the heart of the city’s office and retail area, a trend seen in cities across the country the last 30 years that has proven successful.
The building, constructed in 1913 and expanded to double its size in 1925, is owned by Select Capital Corp., which purchased it for $1.4 million in 2005. Until recently, it housed the Susquehanna Art Museum, which is preparing to break ground on a new home in Midtown.
Deitchman’s residential projects have been middle- to high-end. He said he’s still working out the details of his proposed Kunkel Building project. A multi-family apartment could range from lofts to as many as three bedrooms.
“We have to see if the city will allow residential in a commercial zone,” said Deitchman, who recently renovated the old Governor's Hotel down the street at 4th and Market into student housing for Harrisburg University of Science and Technology.
Deitchman also seeks a special exception request to waive the city’s off-street parking requirements. He is scheduled to present his project to the Harrisburg Planning Commission on Nov. 2 and the Zoning Hearing Board on Nov. 14.


Council, Mayor to Talk Deal Once More

Oct. 25 -- The Harrisburg mayor and City Council will meet next week in a last stab to reach an agreement that would forestall a state takeover.
The public meeting is mandated as part of legislation, passed last week, that could lead to a state-appointed receiver directing most city operations. That legislation gave the city 30 days to reach a financial recovery solution acceptable to the state Department of Community and Economic Development.
"The ultimate goal is to get a plan on the table that everyone can agree with," said Mayor Linda Thompson.
The Oct. 31 meeting will take place at 6 p.m. in City Council chambers. At least one additional meeting, yet unscheduled, will take place, she said.
Thompson appeared optimistic that she and the council could reach a last-minute agreement before Gov. Tom Corbett asks the Commonwealth Court to appoint a manager that would force a financial recovery plan on the city, which suffers from overwhelming debt of at least $310 million due to numerous upgrades over many years to the city incinerator.
The council, however, has chosen an entirely different course to relieve the city of its debt -- the filing of municipal bankruptcy. Nonetheless, Thompson said she is open to a reaching a deal with council during the consent agreement negotiation mandated in the takeover legislation.
"If the City Council wants their city taken over, that will be their decision," she said.


Takeover Process Begins with "Fiscal Emergency" Declaration

Oct. 24 -- Gov. Tom Corbett set in motion the procedural takeover of Harrisburg today by declaring a "fiscal state of emergency" in the city.
The declaration directs the Department of Community and Economic Development to develop a plan that ensures the continuation of basic city services, such as public safety and sanitation, in case the city cannot agree on a financial recovery framework.
The city has one last chance to develop its own recovery strategy. If it cannot agree on a plan by mid-November, the state will take over most municipal government functions under a court-appointed receiver.
“City Council’s failure to enact a recovery plan in order to deal with the city’s distressed finances has led me to declare a fiscal emergency,” Corbett said. “This action ensures that vital services will continue and public safety will be protected."
Last week, the state legislature passed a bill mandating these actions after the council refused three times to pass an Act 47 financial recovery plan for the city. The council, instead, has filed for Chapter 9 municipal bankruptcy.
Mayor Linda Thompson said she would "comply with the law" by undertaking negotiations with council to formulate a plan that is acceptable to DCED.  
“This is council’s last chance to get to the table and be part of the process or get out of the way when the state receiver steps in,” she said. “If we don’t attempt to solve our own fiscal problems, the alternatives will be far worse.”


Legislature Passes Takeover Bill

Oct. 19 -- A state takeover of Harrisburg is all but done, as the state House today passed legislation that likely will take most municipal decision-making out of city hands.
The final vote was little more than a formality, as the House simply had to confirm an amended version of SB1151 that had passed the state Senate yesterday. The bill now goes to Gov. Tom Corbett, who said he would sign it.
Under the bill, Corbett would declare a fiscal emergency in the city. Harrisburg then has 30 days to agree to a financial recovery package before Corbett petitions the Commonwealth Court for appointment of a receiver. A last-minute deal among city officials seems highly unlikely as a City Council majority has rejected versions of a recovery plan three times and now has filed for municipal bankruptcy.
A state receiver likely will implement a recovery plan for Harrisburg based upon the state's original Act 47 plan for the city. That plan relied upon asset sales, including the sale or long-term lease of the city's parking garages, to retire much of the $310 million debt tied to the city's troubled incinerator. It also advocated an 8 percent property tax increase to help offset Harrisburg's recurring annual budget deficits.
"We are not surprised by the actions taken by the State Senate and House," the four-member council majority said in a joint statement. "We ask that the governor either not sign or not implement SB1151, to allow time for the bankruptcy process to work through the system."


A City Divided: Harrisburg Argues Against Itself in Bankruptcy Court

Oct. 17 -- Harrisburg officials had their first day in bankruptcy court today, with the City Council and the mayor's office taking opposing sides in an intra-city feud over the future of Harrisburg.
U.S. Bankruptcy Judge Mary France heard from both the council's attorney, Mark Schwartz, who argued in favor of the city's Chapter 9 bankruptcy petition, and the administration's new outside counsel, Tucker Arensberg, which opposed it.
A hearing on the validity of the petition is scheduled for Nov. 23. France is due to decide both whether the bankrutpcy petition is valid and whether it's even allowed under state law.
The administration believes the petition is invalid because a sharply divided council passed the bankruptcy resolution last week without mayoral review or signature.
In addition, the state questions its validity because, in an attempt to prevent Harrisburg from declaring bankruptcy, the legislature passed a law earlier this year prohibiting third class cities from filing Chapter 9 until 2012. Schwartz said he would challenge the constitutionality of that law.
France also encouraged all parties to the bankruptcy, including Dauphin County and the state, to seek mediation to resolve their dispute.
All sides agreed to try mediation. However, at a later press conference, Mayor Linda Thompson ripped into her opponents on the council, calling them out by name and saying they engaged in "reckless and amateurish behavior." As in the past, she also said their actions were politically motivated, engineered by her likely opponent in the 2013 mayor's race, city Controller Dan Miller, and his allies on the council.
In a related development, the full state Senate today took up legislation that would lead to a state takeover of many city functions. If the law passes, a state receiver likely would be appointed to oversee the implementation of the Act 47 financial recovery package, versions of which have been rejected by the council three times. A full Senate vote is expected tomorrow, with final House consideration later in the week.


Bankruptcy Filing "Illegal," Says Harrisburg Mayor

Oct. 12 -- The declaration of municipal bankruptcy by the Harrisburg City Council is "illegal," Mayor Linda Thompson said today.
Thompson said that the council's actions last night to hire attorney Mark Schwartz -- and then to order Schwartz to file a petition of bankruptcy -- violated city law, as all legislation must be reviewed and vetted by the city's law bureau before consideration by council.   
"I've been advised by the acting city solicitor that these actions have no force or effect under law," Thompson said, who described the surprise bankruptcy filing as "a sneak attack."
Council introduced and passed both resolutions without the prior knowledge or consent of the law bureau or the administration.
"All legislation -- resolution or ordinance -- must be examined for legality," said Jason Hess, acting city solicitor, who added that any engagement with outside legal counsel also must be reviewed and approved.
Thompson refused to say what she might do now, but added that the administration likely would hire its own outside legal counsel to provide advice on next steps. She also characterized the resolute opposition of four members of the council to her policies as "political," orchestrated by her would-be rival in the 2013 mayor's race, city Controller Dan Miller.
"He's using council to advance his own image," Thompson said. "It's politically motivated. It's politics at its worst."
The council's bankruptcy filing appeared to negate any hope that the city would pass a financial recovery plan of its own before Monday, when the state Senate re-convenes and is expected to quickly pass legislation that would force the city to adopt an Act 47 financial recovery plan under a state-appointed receiver.
Thompson said she would work with the state under such a structure.


Harrisburg Council Votes for Bankruptcy

Oct. 11 -- The Harrisburg City Council tonight voted to file for Chapter 9 municipal bankruptcy, despite a recent state law prohibiting such a move.
The 4-3 vote broke along common lines, with council members Susan Brown-Wilson, Brad Koplinski, Eugenia Smith and Wanda Williams directing attorney Mark D. Schwartz to submit a bankruptcy petition to the U.S. Bankruptcy Court of the Middle District of Pennsylvania. Council members Gloria Martin-Roberts, Kelly Summerford and Patty Kim opposed the resolution.
"We're beyond hemorrhaging," said Smith. "We need major, major surgery. We should've been filing bankruptcy in 2010."  
Earlier this year, the state voted to prohibit third class cities from filing Chapter 9, a move designed specifically to prevent Harrisburg from taking this action. Schwartz, though, said he questioned the constitutionality of that law and would file for bankruptcy anyway, leaving the decision to the courts.
"It says you can't file for bankruptcy, but, if you do, you lose state funding," he said. "So, which is it?"
Harrisburg is some $310 million in debt after backing bonds issued by the Harrisburg Authority for repeated upgrades, some botched, over many years to the city incinerator. The authority later defaulted on its debt, leaving Harrisburg and, to a lesser extent, Dauphin County as second guarantor, responsible. Harrisburg also has persistent annual budget deficits.
To resolve the financial crisis, the city entered the state's Act 47 program, which later led to a financial rescue plan. Since then, the council majority has rejected versions of that plan three times, complaining that it places too much of the burden on residents through tax increases and the sale of valuable assets. Council members repeatedly have said they favor a temporary, 1 percent, county-wide sales tax and/or imposition of a commuter tax to help mitigate pressure on residents. They also would like the bond insurer, AGM, to negotiate concessions on the debt owed.
It's unknown what effect, if any, a bankruptcy filing will have on the state's move to force the Act 47 plan on the city and turn over most city functions to a state-appointed receiver. That legislation already has passed the state House and is being considered by the Senate.
The council's bankruptcy resolution, which was not on the agenda, was introduced through a temporary suspension of parliamentary rules. Acting City Solicitor Jason Hess questioned whether the resolution could properly be introduced this way, without previous vetting from his office. He also questioned the hiring of Schwartz as the council's lawyer, which was engineered in a similar manner at the last meeting.
The resolution all but negates any attempt at a last-minute compromise between the council and Mayor Linda Thompson, who said she'd try once more to get council approval for her financial plan before the threatened state takeover. Thompson and the council also now may go to battle over which entity is actually the "governing body," which has the sole ability to file bankruptcy.
Despite the many complications, council members voting for the resolution said that bankruptcy was their only option.
"All the other options -- the Act 47 plan, the receiver, will not do the job," said Koplinski. "They simply will not do the job."


Final Hope? Mayor, Council Give Recovery Strategy Another Try

Oct. 7 -- Harrisburg appears ready to take one last shot at avoiding a state takeover of most government functions, as the mayor and key council members met today to try to iron out their differences.
Mayor Linda Thompson met with Susan Brown-Wilson and Wanda Williams, two councilwomen who have consistently opposed the original, state-sponsored Act 47 financial recovery plan, as well as Thompson's subsequent revision.
Brown-Wilson and Williams now have agreed to send Thompson their additions to the financial recovery framework.
“Both council members assured me that they would forward recommended amendments to the existing City of Harrisburg financial recovery plan by next Wednesday, Oct. 12,” said Thompson in a statement. “I look forward to reviewing the amendments.”
Thompson said that, if she agrees with the amendments, she will schedule an "immediate" vote so council can consider the amended plan.
Last week, the state House passed legislation, now pending in the state Senate, that would turn most Harrisburg operations over to a state receiver, who then would impose a financial recovery solution on the city.
The legislation goes into effect only if Harrisburg cannot agree on its own financial recovery strategy, subject to approval by the state Department of Community and Economic Development. Already, the council has rejected such a plan three times.
The city is in fiscal crisis due to a $310 million debt tied to its long-troubled incinerator, as well as persistent annual budget defiicts.
“This is a positive sign of movement by council on a city plan, which would eliminate the need for a state-appointed receiver to implement the city’s financial recovery,” Thompson said. "I remain optimistic that Harrisburg’s public officials will rise to the occasion and responsibly manage this financial situation.” 


She's Back: HodgePodgery to Re-Locate to New Arts Building

Oct. 4 -- Midtown Harrisburg shrieked a collective, "Oh no," when Dawn Rettinger decided to close her popular crafts and consignment shop at N. 3rd and Herr streets.
Mercifully, the bad news proved to be short-lived, as Rettinger announced today that the HodgePodgery will be the anchor tenant in a new arts-oriented building just a few blocks up the street.
"We plan to open again around the holidays, as soon as the building is renovated," said Rettinger, who added that she's able to relocate due to a much lower rent.
Last week, Eric Papenfuse, owner of Midtown Scholar Bookstore, said that he would purchase the building at 1320 N. 3rd St. from the long-time owner, The West End Republican Club. The sale is due to close Nov. 1, said Papenfuse.
The dilapidated building needs to be completely renovated. In addition to the HodgePodgery, the 3,452-square-foot building will include artist studio space and Rettinger's new travel business, Dawn's Escapades.
Rettinger said that the new HodgePodgery will have a "fresher look and feel" with many new items that will provide a higher-end shopping experience.