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Chapman & Cutler bankruptcy attorney Jim Spiotto on the growing trend of municipal bankruptcies.
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Yeah all right what's stopping California made history last week and -- became the largest US city to it ever filed for bankruptcy.
So -- six municipalities have filed for chapter nine bankruptcy protection this year compared to only thirteen in all of 2011.
She got to wonder is a trend that we got also are worrying about joining us now is James yeah.
Attorney who tracks municipal bankruptcies.
Jim I'm really glad you're with us in just a little housekeeping.
When we say we need to -- we mean any town village city it's it it's it catchall phrase.
OK so Stockton goes down because of its pensions and trying to expand its downtown.
Is that kind of the root of the problem with all our major cities right now.
Yes -- -- the problem we face is worrying economic downturn.
But costs and expenses of municipalities.
Continue to be at the same level for possibly higher -- to balance the budget and if you don't balance the budget.
Problems -- arise infrastructure.
Public safety education.
And workers are cost -- and avoid.
Right that they would chapter nine bankruptcy though much different from corporation files Chapter Eleven is.
It's really hard for municipality to liquidate its assets right court can't force and to do that.
So basically all they're doing is -- in their debtors and it doesn't do much for the local economy.
Write the chapter nine.
Is municipal that adjustment.
It is a process.
Not a solution right in so all that chapter nine does is basically.
Help you adjust your old that you still need to develop the business plan.
How do you -- -- economy stronger party get people back to work.
How do you have public safety that is desirable how do you -- our business how -- -- improve education.
And unfortunately a lot of them are not doing this was really insisted to see that.
Nebraska is actually the bankruptcy -- -- presumed it was California.
But it gets to your point.
The word municipality is not just cities towns and villages -- as far as chapter nine's -- since 1937.
There been 640.
But.
The vast vast majority have been small special tax districts small entities.
That.
Do not have a lot of -- their their first single purpose.
And are not normally a -- villagers tell me.
That's -- a rare event.
Now Georgia and Iowa actually do not allow bankruptcies at all which is really interesting to me OK so tell us who's next who was next to -- we know Detroit's on the list.
Scranton Pennsylvania is on the list of about sex.
While.
You know it's it's hard to -- because you know it's a question of where the municipality is gonna find.
The solution.
Traditionally when you know we've had problems in the past in 1975 New York City had problems.
But the state came in and help them and they worked their their situation out same thing for Cleveland 78 Philadelphia 91.
As far as the future goes for major municipalities.
This the trend has been and will see whether or not this changes they're gonna try to work there issues out.
Because they want access to the -- bull market.
And -- going to a chapter proceeding it's gonna affect their credit.
Right had taken some municipal bonds -- their credit is in the toilet -- Fiat out thank you so much we gotta keep on top of this story -- Thank you good --
