Note that since the bankruptcy process changes nothing in the locality's political structure. Therefore, the incentives that promoted local spending and caused the bankruptcy to begin with, remain in force.
This explains why municipalities that file for Chapter 9 tend to return to insolvency after only a few years. The city of Mack's Creek, for example, filed for bankruptcy in 1998, then for a second time in 2000, and then it contemplated a third bankruptcy in 2004. The city of Westminster, Texas filed on 2000, and only 4 years later filed again. The city of Prichard, Alabama filed for bankruptcy at the end of 1999, came out of the bankruptcy only in 2007, and now, talks of a new bankruptcy filing has resumed. Without addressing the cities' core problems, the bankruptcy filing offered no help, and the cities' situation quickly deteriorated again.
The weakness of the municipal bankruptcy process was the reason for Connecticut's objection to Bridgeport's bankruptcy filing in the 1990s. Back then Bridgeport suffered from a severe economic crisis. The city projected a $16M budget deficit for the years 1991-1992, and its residents were burdened with the highest effective tax rate in the state. Bridgeport was unable to finance an adequate level of public services, and even basic services, such as police protection and street cleaning, were not properly provided. Hoping to escape financial disaster, in 1991 the city filed for bankruptcy. The state of Connecticut, however, objected. The state officials did not believe a bankruptcy court to be the proper venue to solve Bridgeport's problems, and they understood bankruptcy could do more harm than good.
Not only is Chapter 9 an unsuitable mechanism for helping distressed localities, but it may very well aggravate their situation. First, bankruptcy filing harms the city's reputation as a place for residence. A bankrupt municipality is associated with poverty and misery, and this image deters businesses and individuals from locating in the city. Bankruptcy, with its uncertainties and stigma, decreases real estate prices and stifles economic activity and investments in the city. Instead of creating growth, bankruptcy may shrink the local tax base and hold the city's development back even further. Second, bankruptcy damages the city's reputation as a debtor. The creditors, harmed by the city's debt load, are reluctant to extend the city any more credit, and the city's credit rating may suffer for long period of time. Bankruptcy, therefore, vastly escalates the city's costs of borrowing, and it can block the city's access to the credit markets altogether. Indeed, bankruptcy filing jeopardizes the very resources the city needs in order to recover -- additional taxes and credit. The city may come out of the filing with less debt, but also with fewer prospects for the future.
Moreover, a municipal bankruptcy filing can produce negative implications for the state. States have a tremendous impact on the financial condition of their municipalities, and they largely influence both the local revenues and expenditures.
Due to this strong link between the state and the local economies, a default or bankruptcy filing of one municipality raises concerns about other adjacent municipalities in the same state. A local crisis may be the result of general state policies toward local governments, and it shows that the state does not take the necessary measures to maintain the fiscal health of its municipalities. The crisis, therefore, although seemingly an isolated local event, may be a sign for more widespread crises in the future, and may cause the creditors to re-evaluate the risk associated with public debt in the entire state. These concerns increase the price of credit for all public issuers in the state, even for those issuers that have no direct connection with the city's default. This claim received empirical support in various studies on the effects of the Orange County, CA bankruptcy.
Studies show that the county's bankruptcy had significant conspiring effects on the entire municipal bond market, and especially on public issuers within California.
Following the bankruptcy, there was a considerable decrease in the value of many municipal bonds, even in bonds that were issued by local governments and other public bodies that had no direct exposure to Orange County's crisis. The claim also echoes the positions of states with regard to municipal bankruptcy filings. Many states object to Chapter 9 filings, and one of the main reasons state officials provide to support the objection is the effect bankruptcy might have on other public issuers in the state.
Municipal bankruptcy filings, states...
The recent impositions on personal bankruptcies attracted the attention but the legal experts opined that new rules could have extensive effects. In common, in the words of a bankruptcy lawyer Jon Schneider of Goodwin Procter in Boston, "There is probably going to be a raft of filings in September to avoid this new law." (Law could trigger Chapter 11 surge) D.J. Baker of Skadden Arps a New York lawyer,
It provided for fast proceedings, encouraged debtors to reschedule their obligations rather than liquidate and helped creditors recover their claims against bankrupt estates. The 1994 Act also created the National Bankruptcy Commission, charged with investigating further modifications of the bankruptcy law. Latter laws, however, disregarded many of the Commission's recommendations. In April 2005, President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Many
Sometime the debtor is able to successfully reduce its liability and returns to profitability but quite often it returns to seek the court's protection again and sometime the end result is liquidation. Under Chapter 11 protections, the debtor gets an automatic protection from all creditors. The unsecured creditors cannot lay a claim on assets and secured creditors are also prevented from foreclosing on their collateral. A Chapter-11 company also gets
It is increasing taxpayer more and more every year. More than likely the officer in question will be fired or put in paid leave of absence. Never is the officer investigated by internal affairs or federal agencies. This shows an inconsistency within the law enforcement infrastructure that needs changing in order to protect against further risk. In this review of previous studies and related literature, information is presented in support
Technology Updates The Cost of Technological Advances The development of technological advances has been significant in the last 50 years but more so in the last 30. According to Moore an early pioneer in silicone technology, the capacity for engineering technology innovation is clearly rapid. Moore set a benchmark for silicone technology claiming that capacity would double the number of transistors on a chip, which determines the capacity for memory every
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