PhillyDeals: Harrisburg's financial woes spur a payday for experts

Harrisburg - the city - is broke. It's spending more money than it brings in.

The mayor and council don't agree on what to do. So the state has stepped in - as it has with Philadelphia and Pittsburgh and Chester and other cities in years past - to prevent Harrisburg from stiffing its bankers and bondholders and others who live off the money they lend to elected officials. The state wants to ensure that the various lenders are still being repaid with interest, by taxpayers, for years to come.

It's a payday for experts. The Reading law firm Stevens & Lee P.C., former State Rep. Bob O'Donnell (D., Phila.), Novak Consulting Group Inc., and the Pennsylvania Economy League are splitting nearly $1 million in state fees to create, among other things, a new report that concludes Harrisburg needs fewer police and firefighters on its payroll - and more accountants.

The prognosis, as usual in such cases, also includes selling or leasing public property, trimming pay and benefits for city workers, and laying off trashmen in favor of private contractors.

The report goes on for 424 pages, micromanaging small city departments on overtime patterns and insurance-contract negotiations, for a few thousand dollars in possible savings here and there.

It spends less space reviewing how the city ought to sell its incinerator and parking garages, for many millions.

What's not in the report is a detailed account of what went wrong in Harrisburg: The city, under longtime Mayor Stephen Reed, borrowed way too much money to finance that incinerator and other projects.

And I didn't find any instructions for preventing future politicians from digging the same kind of hole again.

I ran the report past Mark D. Schwartz, a Bryn Mawr lawyer and former public-finance investment banker.

"Anyone in public finance knows that for decades Harrisburg has been the poster child for taking on debt and embracing any and every financing scheme ever concocted," Schwartz told me. "The bill has come due for all the games."

What to do? "Maybe the city should levy a tax on all the firms that made millions on those financings," Schwartz suggested. "Then it would have a huge surplus. Problem over."

Maurice J. Spagnoletti

, a former

Summit Bank of Pennsylvania

chief executive officer, was shot to death in Puerto Rico on Wednesday as he drove home in his seven-year-old Lexus from his new job as executive vice president of Puerto Rico's troubled

Doral Bank

.

Spagnoletti was hit in the head by three shots from a .40-caliber pistol, fired from a moving car. "I would not speculate at this time as to the motive," Harry Rodriguez, FBI spokesman in Puerto Rico, told me. He said the FBI was helping Puerto Rico police in the investigation.

Two days after the slaying, police hadn't identified the car that carried the killer. Doral issued a statement calling Spagnoletti "an honest man" and mourning his death, and adding that the company was "sound."

Spagnoletti had been leading its reorganization, including layoffs.

"Absolutely shocking," said veteran Philadelphia banker-turned-bank-investor James Lynch, who was once Spagnoletti's boss at Summit. "He was our branch-banking guru," Lynch said. "He was a great organizer of people, a good leader, a people person. He was a taskmaster, but he was a real cheerleader. He was hard, but fair."

Lynch said the killing of such a prominent businessman, if business-related, seemed unusual for the island, a U.S. territory.

"I know a number of Philadelphia real estate investors who have negotiated malls and projects down there. They say it's like going into another country, it helps to know people," Lynch said. "But I've never heard of any physical threats."

Spagnoletti, a graduate of St. Peter's College in Jersey City and Fairleigh Dickinson's business school, worked at a series of bank-executive jobs in the Midwest after leaving Summit in 2000. He leaves a wife and 5-year-old daughter.