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Pennsylvania court approves Harrisburg receiver

A railway bridge over the Susquehanna River is seen in Harrisburg, Pennsylvania
A railway bridge over the Susquehanna River is seen in Harrisburg, Pennsylvania

HARRISBURG, Pennsylvania (Reuters) - A Pennsylvania judge on Friday approved the appointment of David Unkovic as the receiver for the city of Harrisburg, the state's debt-laden capital, even though Unkovic has had ties to some of the city's largest creditors.

Commonwealth Court Judge James Kelley said Unkovic's experience with the creditors was not a conflict. Unkovic is a long-time public finance expert

"The court is convinced Mr. Unkovic meets the statutory qualifications and that there are no demonstrable conflicts which would prevent Mr. Unkovic from performing his fiduciary duties in the best interests of the City and the Commonwealth," Kelley wrote in his memorandum.

Unkovic will now have 30 days to develop and submit a recovery plan to the Commonwealth Court. Harrisburg is saddled with $317 million debt incurred during expensive renovations of an incinerator.

The appointment of the receiver followed a ruling last week by a U.S. Bankruptcy Court judge that the city of Harrisburg could not file for bankruptcy to get out its outstanding debt.

Unkovic worked for 27 years at the Saul Ewing law firm, which is representing Assured Guarantee Municipal Corp. in its fight to have Harrisburg pay what it owes on bond finance deals related to the retrofit of the incinerator.

He also worked for three years with the law firm of Cozen O'Connor, where he was bond counsel on behalf of Dauphin County, another major player in the incinerator project. Cozen O'Connor represented the administration of Pennsylvania Governor Tom Corbett in its petition to have Unkovic named as Harrisburg's receiver.

Kelley said he was confident that Unkovic could perform his job as receiver fairly.

"Mr. Unkovic assuaged the court's concerns in relation to possible conflicts regarding payment as receiver and his position as a state employee, possible involvement with all of the city's authorities or stakeholders, financial interest in entities involved either directly or tangentially in these proceedings, as well as financial interests and conflicts remaining from past employment," the judge said.

The emergency action plan submitted last month by the secretary of Pennsylvania's Department of Community and Economic Development, Alan Walker, is to be implemented by Unkovic.

Harrisburg Mayor Linda Thompson, who had opposed the bankruptcy filing approved by the City Council, has supported using a modified version of Pennsylvania's Act 47 process for distressed cities.

"I am pleased that any questions about the bankruptcy filing by the city council and the appointment of Unkovic as city receiver have been resolved so that the focus can narrow in the next 30 days to the development of a financial recovery plan that moves the City of Harrisburg to long term fiscal solvency," Thompson said in a statement

Unkovic will remain on the state's payroll with the same $125,008 salary he started with six months ago when he became chief counsel for the Department of Community and Economic Development.

The governor also welcomed the approval. "The administration is pleased that the court moved quickly on this decision putting Harrisburg another step closer to fiscal recovery," Kelli Roberts, a spokesman for Corbett, said in an email.

(Reporting By Mark Shade)

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