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Saturday, November 12, 2011
Law - Municipal bankruptcy: How's that working out for you?
Municipal bankruptcy was the topic of a number of ILB entries in late 2010 and early 2011.
This long Nov. 10, 2011 NY Times report by Campbll Robertson, Mary Williams Walsh and Michael Cooper is headlined "Bankruptcy Rarely Offers Easy Answer for Counties." Here is a sample:
Municipal bankruptcies remain extremely rare, and each of these cases can be viewed as unique, a one-off: Jefferson County was undone by a major sewer project marred by corruption, Harrisburg by borrowing more than it could repay for a disastrous incinerator project, Central Falls by pension problems, and Hamtramck by the woes of the auto industry. Viewed another way, though, they show how the downturn has left the nation’s most distressed cities with few options for papering over huge problems, and left some desperate elected officials placing their hopes in bankruptcy judges.Their desire for simple solutions may be in vain, though: for constitutional reasons, the part of the federal bankruptcy code that municipalities use, Chapter 9, sharply limits the power of bankruptcy judges to intervene in local governance.
“Chapter 9 really puts the judge more in the position of being a referee than somebody who can really run the county,” said Paul S. Maco, a partner with the firm of Vinson & Elkins who led the Office of Municipal Securities at the Securities and Exchange Commission during the bankruptcy of Orange County, Calif. — the nation’s largest municipal bankruptcy until this week. “Chapter 9 doesn’t take away the difficult political decision-making needed to address a financial credit problem.”
Posted by Marcia Oddi on November 12, 2011 02:09 PM
Posted to General Law Related