2012 California Municipal Bankruptcies to hit Three, More Probable


As predicted, the Stockton, CA Chapter 9 filing was not alone, as now two more communities have decided to take the path of municipal bankruptcy in the state.  

Lawmakers in San Bernadino, CA voted Tuesday to pursue a municipal bankruptcy filing, like Stockton did before it late last month. It also comes on the heels of Mammoth Lakes’ Chapter 9 filing in California just before the Independence Day holiday. San Bernadino, too, seems to be tied to a lot of contracts with current and retired public workers that are zapping its budget. California had implemented a state law requiring a 90-day mediation period designed to bring municipalities and their creditors to the negotiating table before struggling cities can file. While it has likely slowed the pace of filings, votes and discussions to pursue the bankruptcy option have continued.

“There will be a series of filings in the next six months to a year, there’s no doubt about it,” Lowenstein Sandler PC’s Bruce Nathan, Esq. told eNews in an interview last week. Nathan is among experts who have been predicting a surge in Chapter 9 filings since even before Harrisburg, PA; Jefferson County, AL; and Central Falls, RI grabbed headlines for attempts to file nearly a year ago.

San Bernadino had made mention of employee cuts in a fiscal plan released on its website, complete with amateurish corrections/changes marks throughout the PDF, and cited there were “no easy choices” on the horizon while foreshadowing impending decisions: “The financial situation in 2012 is a systemic problem held over for years…Clearly, reductions to the expenditures side of the budget are not going to product the level of savings that will be needed to balance the budget.”

- Brian Shappell, CBA, NACM staff writer

(Note: More on this story including Chapter 9 talk out of two Pennsylvania communities in this week's eNews, available Thursday afternoon).

 

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