Municipal Bankruptcy Roundup: San Bernardino, Harrisburg, Detroit

In San Bernardino, CA, the City Council has voted on budget measure that would include stopping payments to its pension program at least temporarily. Officials will submit the proposal to a judge who tasked with reviewing its Chapter 9 bankruptcy filing, as well as its eligibility, before a deadline at the end of this week. Entitlements, such as worker pension funding, are the driving force behind the California community’s ongoing debt crisis. It is estimated the city has 143.3 million in unfunded pension obligations at present. Employee and retiree entitlements have become a financial scourge affecting many cities throughout the nation, and it's only expected to escalate as a result of a rapidly aging workforce.

Meanwhile, Harrisburg, PA, talk of a potential municipal bankruptcy could have legs again and may just force its creditors back to the negotiating table. Though the city has been denied Chapter 9 eligibility multiple times because of a quickly-passed state law aimed at temporarily blocking third-level cities in the state from filing for, the entire dynamic could change as said law is just days from expiring. As such, parties involved with an ill-fated trash incinerator project that has become the complete opposite of the financial windfall it was expected to be, could see a city with a bit more of power in the negotiating process without a massive obstacle in its way.

Talk of potential municipal bankruptcy has begun anew again in Detroit, as the city failed to meet certain required benchmarks set by the city to trigger some $10 million in state funding. City officials have acknowledge that it could run out of cash before year’s-end and struggle mightily to meet commitments without the funding. As such, city Mayor David Bing has noted that unpaid furlough days for public employees are likely to begin soon after the 2012 holiday season. The city has been regularly mentioned among municipalities struggling the most with insolvency for several years.

-Brian Shappell, CBA, NACM staff writer

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