"It was not a pretty picture," says David Unkovic.
The Main Line lawyer was talking about last week's state Senate hearing on the way municipal finance sausage is made in Pennsylvania, where local government and the borrowing that finances it - at taxpayers' expense - seem to be the most lucrative industry in too many shrinking towns and counties.
Unkovic should know. He was Gov. Corbett's first choice to reorganize the woeful finances of the City of Harrisburg, where an audit and an initial state Senate hearing have belatedly exposed a borrowing binge under former Democratic Mayor Steven Reed.
The mayor had the support of county officials to fund dead-end projects like a Wild West museum and an outdated trash incinerator. Those projects enriched Wall Street investment bankers, New York and Philadelphia lawyers, financial advisers, politically connected contractors, and just about everybody except the taxpayers stuck with hundreds of millions of dollars of debt. The bills can be paid only by selling city assets and cutting city services.
Unkovic, a municipal bond lawyer for 30 years, resigned his Harrisburg receiver appointment earlier this year after Corbett failed to effectively support Unkovic's efforts to protect public assets and hold financiers and their enablers accountable.
Unkovic's appearance at the hearing led by state Sens. John Eichelberger (R., Hollidaysburg), John Blake (D., Scranton), and Mike Folmer (R., Lebanon), was Unkovic's attempt to show that he may have quit, but he still took his responsibilities seriously and he hasn't gone away.
Here is the short version of Unkovic's program:
Tighten Pennsylvania's weak law to force local governments to open and audit their books, file updated financial statements that conform to national standards, and show how borrowing will be repaid. Do all of that before state officials approve bond sales.
Prohibit local governments and authorities from entering into any new interest-rate swap agreements. Reverse ex-Gov. Ed Rendell's 2003 swaps bill that Unkovic, state Treasurer Jack Wagner, and other critics contend have cost Pennsylvania cities millions through failed agreements with Wall Street banks that boosted borrowing costs, instead of reducing them as expected.
Make it a crime to lie about a town's financial condition and the effects of particular borrowing arrangements. Current law that threatens those who "mislead a public servant" with up to two years in prison apparently isn't enough. Add, as Unkovic urged, "specific criminal violations and penalties."
Let Pennsylvania communities file for federal bankruptcy protection when state oversight isn't enough. Corbett and politicians tied to past Harrisburg administrations have resisted this. That's because it could expose local officials and their bond experts to legal and even criminal complaints on behalf of bondholders stiffed by bankruptcy proceedings.
Have the General Assembly ask federal prosecutors to investigate, as Unkovic termed it, the "small group of probably 25 to 50 people and institutions who collectively caused this devastation" of Harrisburg's finances and "showed a fundamental disdain for the law."
If the federal authorities refuse to act, legislators should appoint their own special prosecutor. Or maybe incoming state Attorney General Kathleen Kane, the first Democrat in the job, will finally launch an effective state probe – "The only way to really find out, for the good of our democracy and our commonwealth, whether there was criminal activity involved in these financings," Unkovic said.