Tag archive for municipal bankruptcy

Municipal bankruptcy and war

Rhodes MemeBankruptcy, like war, is an extraordinary means for resolving disputes that appear irresolvable under ordinary conditions. Much of what Detroit seeks to accomplish in bankruptcy could have been accomplished outside of federal court, but only with great difficulty

Going nuclear in Detroit….

Detroit financial manager Kevyn Orr has filed a plan to reduce the city’s debt and exit bankruptcy, formerly dubbed the plan of adjustment,and it has few Orr 1surprises, largely doing what Orr has said he would do. But that doesn’t mean it isn’t unprecedented, nonetheless. Orr has, in the last few months, shaken up the municipal finance business with his lawsuits challenging financing techniques previously considered sacrosanct, so much so that one municipal bond firm accused him of going nuclear…

Detroit pension borrowings: What a tangled web….

There’s a rich irony in the news that current Detroit officials are suing in bankruptcy court to renounce the pension debt transacted by the administration of Kwame Kilpatrick back in 2005. The claim of Detroit officials today, that the $1.44 billion in borrowing was illegal because Detroit used elaborate gimmicks to circumvent debt limits, echoes lawsuits filed by taxpayer groups in many state courts over the years to stop similar borrowing ploys…

How significant will Detroit be for public pension policy?

Cross-posted at publicceo.com.
Significant, but perhaps less so than developments in Illinois and California. Nothing that happens in federal bankruptcy court can change the fact that pension reform is mostly a matter of state law.
In addition to being the largest municipal bankruptcy in US history, Detroit …

If cities can’t be free to fail, they shouldn’t be free in the first place

Were Detroit declared ineligible for bankruptcy, it would be too bad for the city and its residents, but not necessarily bad for other cities. Municipal bankruptcy is an expensive, uncertain process that will never serve as a satisfying policy remedy to local governments’ fiscal troubles. …

Scranton: Unions, arbitration equal big tax increase

Pennsylvania_Paper_&_Supply_Company_towerIf you’re living in a city where “municipal unions control city government” and binding arbitration allows a judge to impose a settlement on you that you can’t afford, what can you expect? A 40 percent to 50 percent increase in your property taxes, it seems, if you happen to live in Scranton, Pa., birthplace of VP Joe Biden.

Late last week Moody’s warned that Scranton could face default thanks to a cash crunch similar to the one it faced in 2012, when the city missed bond payments and reduced pay of workers temporarily to minimum wage…

Is good faith bargaining good policy?

Detroit filed for bankruptcy in mid-July, but it is not yet bankrupt, meaning in possession of the special debt-adjustment powers accorded to municipal entities by the federal bankruptcy code. That now depends on if Judge Stephen Rhodes was convinced by the arguments Detroit city attorneys …

Did Vallejo voters jumpstart work on a new road to bankruptcy?

Less than two years after exiting bankruptcy, the city of Vallejo faces new financial distress thanks to its failure to deal with its pension costs while in Chapter 9. Despite that, voters last week elected a new slate of council officials backed by the Jumpstart …

How to take over a city, a primer

Taking over a city is a thankless job. Having participated in two state-imposed municipal dictatorships on US soil, I can personally attest that the honors will only come years later, if they come at all. But it’s necessary work, because all taxpayers deserve effective government, …

Municipal bonds: past performance no longer a guarantee of future results

The municipal bond market exhaled last week when the Federal Reserve announced that it was not planning to start scaling back its open-ended bond buying program anytime soon. State and local governments had been on edge after suggestions in June that led many to expect …