The Financially Distressed Municipalities Act, also known as Act 47, empowers the Pennsylvania Department of Community and Economic Development (DCED) to declare certain municipalities as financially distressed. It provides for the restructuring of debt of financially distressed municipalities; limits the ability of financially distressed municipalities to obtain government funding; authorizes municipalities to participate in Federal debt adjustment actions and bankruptcy actions under certain circumstances; and provides for consolidation or merger of contiguous municipalities to relieve financial distress.
On October, 1, 2010, Mayor Linda D. Thompson filed a request with Austin Burke, former Secretary of the DCED, asking for Harrisburg to be designated a financially distressed municipality. DCED investigated the financial affairs of the city and on December 15, 2010, following public hearings on the city’s request, former DCED Secretary Burke issued a determination of municipal financial distress for the City of Harrisburg.
On January 12, 2011, former Secretary Burke appointed the Novak Consulting Group as the Recovery Plan Coordinator for the City of Harrisburg. The Coordinator filed Harrisburg’s Act 47 Recovery Plan with the municipal clerk on June 13, 2011 and, following a public hearing, filed a revised Recovery Plan with clerk on July 8, 2011.
On July 19, 2011, a majority of the Harrisburg City Council rejected the Coordinator’s Act 47 Recovery Plan. Following the City Council’s rejection of the Act 47 Recovery Plan, Mayor Thompson was tasked with developing and filing an alternate Recovery Plan pursuant the provisions of Act 47. The Mayor filed a Recovery Plan on August 22, 2011 and on August 31, 2011, a majority of Harrisburg City Council rejected Mayor Thompson’s Recovery plan and again rejected a modified plan on September 13, 2011.
On September 20, 2011, Governor Tom Corbett signed into law Senate Bill 1151, amending Act 47 and providing for a Declaration of Fiscal Emergency in circumstances in which a financially distressed city of the third class fails to adopt a financial recovery plan. Additionally, the law provides for the appointment and confirmation of a receiver if the distressed city fails to enact a consent agreement to adopt and implement a recovery plan.
As a result of the fiscal circumstances existing in the City of Harrisburg, Governor Corbett declared a fiscal emergency on October 24, 2011. As part of the Emergency Declaration, Governor Corbett directed the Secretary of DCED, C. Alan Walker, to develop an Emergency Action Plan to ensure all vital and necessary services are maintained in Harrisburg until a fiscal recovery plan is enacted.
On November 18, 2011, under the direction of Governor Corbett, DCED Secretary Walker filed a petition with the Commonwealth Court to appoint David Unkovic as the receiver of Harrisburg. Senior Judge James R. Kelley then held a hearing on the petition to appoint Mr. Unkovic on December 1st. In accordance with Act 47, the determination on the appointment is based on three main criteria:
- 30 days have passed since the declaration of fiscal emergency;
- The governing body of the distressed city has failed to adopt an ordinance to enact an acceptable fiscal recovery plan; and
- A fiscal emergency continues to exist in the City of Harrisburg.
On December 2, 2011, Judge Kelley approved the petition to appoint David Unkovic as the receiver of Harrisburg. Unkovic is now tasked with developing and submitting a fiscal recovery plan to the Commonwealth Court, DCED Secretary, city council and the mayor on Monday, February 6, 2012. (The Commonwealth Court granted an extension from the original filing date of January 3, 2012)
Once the plan is submitted, the court must conduct a hearing on the recovery plan within 30 days of receipt of the receiver’s plan and act on the confirmation of the plan within 60 days of receipt.
At the direction of Governor Corbett, DCED Secretary Walker filed a petition with the Commonwealth Court to appoint Major General William B. Lynch, USAF, Ret. as the new receiver of Harrisburg. Judge Bonnie Brigance Leadbetter then held a hearing and confirmed General Lynch’s appointment on May 24th.