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Willig, Williams & Davidson Partner and Labor Attorney Alaine Williams Discusses Harrisburg Compensation Matters

October 22, 2010

Harrisburg Trying to Find a Lender to Cover City Workers' Paychecks (The Patriot-News)

By: Charles Thompson

If you work for the city of Harrisburg, the cascading financial problems have been distilled now to one very personal question: Will I get my paycheck next week?

No one had that answer as of Thursday night.

City officials continued to talk with lenders about short-term financing to help them cover a growing cash-flow emergency for the rest of this year.

To date, the city’s sick financial situation and political strife have made even hometown lenders skittish.

By late Thursday, there were no takers, said Brian Hudson, one of the Rendell administration officials trying to help Mayor Linda Thompson weather the crisis.  “We have had some conversations with some potential lenders,” Hudson said. “I don’t have any firm commitment yet.”

City workers aren’t going anywhere. Leaders of all three unions — police, fire and nonuniformed employees — have confirmed in recent days that they would stay on the job.

The immediate problem is that the city’s payroll of approximately $1.2 million is coming due next week. Robert Kroboth, Thompson’s interim chief of staff, said Wednesday night that the city had $330,000 cash on hand.

That cash balance had grown, according to the City Controller’s Office, to $492,000 by the end of the day Thursday. But there was still great uncertainty in City Hall about whether the remaining gap can be closed.

The next five days should tell the tale. City Treasury staffers said the city will need to have cash in hand Tuesday in order to get checks out to the 557 city workers on time.

Kroboth has projected a $4.8 million deficit for the year. In addition to the payroll concerns, payments to many vendors have already been stopped.

Neither Kroboth nor Thompson’s spokesman, Chuck Ardo, responded to questions Thursday.

Attorneys for the city’s unions would likely quickly file a complaint under the federal Fair Labor Standards Act if workers aren’t paid. That could expose the city to interest on back pay, and possibly additional damages if the checks are missed.

Running out of money “is an excuse, but it’s not a ‘Get Out of Jail Free’ card” for the city failing to make payroll, said Alaine Williams, a labor lawyer who often represents the American Federation of State, County and Municipal Employees in such cases.

“The act requires payment and it requires payment on a regular payday,” she said.

Meanwhile, frustrations over the situation simmered.

Workers, who asked not to be identified for this story, said morale is flagging, if their efforts are not.

The head of the union representing the city’s non-uninformed workers retained some optimism Thursday night.  “Somehow, some way, things always seem to work out,” said Sue Weldon, president of AFSCME Local 521.

City Controller Dan Miller blasted the mayor, saying she took a bad situation and made it worse. Thompson was handed a budget that was widely acknowledged to be several million dollars out of balance when she took office in January. “Management should have been paying attention to this from January 1, if not earlier,” Miller said.

The city has had close calls with paydays before this fall. In November 2006, then-Mayor Stephen R. Reed was forced to take out a $7 million loan to cover budget shortfalls. That loan, which was preceded by 32 layoffs, was finalized one day before a payroll was due.

In September, with the double whammy of a debt-service payment and a payday looming, bills were met with the help of a $4.3 million aid package cobbled together by the Rendell administration.

Two weeks ago, the city was pulled back from the brink by a set of expedited payments of cash from the Harrisburg Authority, Harrisburg Parking Authority and Harrisburg School District.

This year’s troubles, Thompson has contended, are more directly related to the debt from the Harrisburg Incinerator that the city has guaranteed.

In 2009, the city was forced to spend $4.8 million to make incinerator-related debt payments that the Harrisburg Authority could not meet, Thompson said.

That payment ate up critical cash reserves, the mayor said.

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