Municipalities and state governments are in crisis. The prolonged economic downturn, followed by a weak economic recovery and exacerbated by the historic unwillingness of local governments to address legacy liabilities, has led many cities to seriously consider the once unthinkable prospect of municipal bankruptcy.
Goodwin Procter’s Public Finance and Financial Restructuring Groups have created the MuniBK Blog to provide content, analysis and commentary on the intersecting issues of public finance, restructurings and Chapter 9 of the United States Bankruptcy Code. Our goal is to both aggregate information and developments from around the country, and to share Goodwin’s analysis of legal and business developments as they occur.
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San Bernardino Wins Its Eligibility Fight

The Chapter 9 case of the city of San Bernardino, California will proceed. After a year in limbo and a spirited fight from the California Public Employees’ Retirement System (CalPERS), San Bernardino was finally able to win a ruling from Bankruptcy Judge Meredith Jury that it is eligible to be a Chapter 9 debtor. San […]

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Detroit News Roundup

Friday’s hearing in Detroit provided some indication of how the Detroit’s high-profile bankruptcy case will proceed moving forward. Judge Rhodes agreed to the creation of a committee of retired workers but left the U.S. Trustee to decide who its members would be, leaving open the possibility that organized labor would be represented. Judge Rhodes also […]

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A Back Door Bailout for Detroit?

Chapter 9 is designed to “provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts.” Much like Chapter 11, this can be accomplished in a variety of ways (other than a conversion of debt to equity), and a municipality has great latitude in proposing a plan […]

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Can P3s Save the Public Sector?

Detroit’s recent bankruptcy filing, the largest Chapter 9 filing in U.S. history, highlights the potential consequences faced by our nation’s increasingly cash-strapped municipalities. Municipal bankruptcy filings remain relatively rare; approximately 40 governmental bodies (including utility authorities and special districts) have filed for Chapter 9 protection since 2008, which tracks the average of 8 filings per […]

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Jefferson County Bondholders Take Fee Fight to Higher Court

The indenture trustee for Jefferson County, Alabama bondholders recently appealed a bankruptcy court ruling that allowed the county to pay their bankruptcy lawyers out of the revenue from the municipal sewer system, which also backed the bonds. The bankruptcy court’s opinion was the third issued in the case addressing sewer system revenues and the various […]

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Detroit Files for Chapter 9

The city of Detroit filed for bankruptcy protection in the Bankruptcy Court for the Eastern District of Michigan on Thursday. Detroit’s bankruptcy is the largest Chapter 9 case in U.S. history. The filing comes just over three months after Governor Rick Snyder appointed Emergency Manager Kevyn Orr to try to solve the city’s apparently intractable […]

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Judge Orders Detroit Bankruptcy Filing Withdrawn

On Friday, Michigan State Circuit Court Judge Rosemarie Aquilina ordered the city of Detroit’s emergency manager, Kevyn Orr, to withdraw a federal bankruptcy petition filed on behalf of the city earlier this week, calling the law which allowed Michigan Gov. Rick Snyder to authorize the filing “unconstitutional.” The ruling was issued as part of a […]

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Jefferson County Files Plan of Adjustment

On Sunday, Jefferson County, Alabama filed its plan of adjustment and disclosure statement, officially initiating the end game of its Chapter 9 bankruptcy. The county and its stakeholders have been working towards the filing for months, with the county and the holders of much of its sewer system-related debt reaching a compromise that forms the […]

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New York State Takes Steps Toward Establishing Bankruptcy Alternative for Cash-Strapped Municipalities

New York State Governor Andrew Cuomo, along with other state lawmakers, recently announced plans to establish a financial restructuring board to help financially distressed municipalities. The board would consist of ten members, six of whom would be appointed by the Governor, and would be tasked with making recommendations on improving finances and the management and […]

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Another CA Hospital District on Bed Rest – Moody’s is Watching

Thumbnail for 1302 Moody’s Investors Service placed Antelope Valley Healthcare District’s Baa3-rated revenue bonds on review for downgrade following the unexpected resignations of its CEO and CFO. The review will last for 90 days. The Hospital District, which operates a 420 bed hospital, has $134 million in outstanding debt. In May, both the CEO and CFO resigned, for reasons […]

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Is Detroit Jefferson County All Over Again?

Now that Jefferson County is wrapping up its Chapter 9 proceeding, an examination of the components that led to its downfall is in order. As the New York Times aptly wrote, “Jefferson County’s problems involve corrupt politicians and bad luck, but they also include a longstanding reluctance to face facts…” Sound familiar to Detroit? While […]

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When is a Political Subdivision Not a Political Subdivision? When the IRS Says So

The IRS has issued a Technical Advice Memorandum that could significantly impact the ability of special districts to issue tax-exempt debt and to seek bankruptcy relief under Chapter 9. The memorandum concludes that a community development district formed under the Florida Uniform Community Development District Act of 1980 (the “Florida Act”) was not a “political […]

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Visionary Schemes Need Not Apply: The Chapter 9 Plan Feasibility Requirement

Chapter 9 debtors must demonstrate “feasibility” before their plans of adjustment can be confirmed by a bankruptcy court. This is similar to the corporate reorganization requirement that a plan is “not likely to be followed by liquidation or the need for further financial reorganization.” Generally, feasibility means that the debtor has the ability and financial […]

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CalPERS Seeks to Disqualify Counsel for National Public Finance Guarantee

In the continuing saga of Chapter 9 petitions in San Bernardino and Stockton, California, the cities’ largest creditor, CalPERS, has petitioned the Bankruptcy Court to disqualify counsel for National Public Finance Guarantee (NPFG), the cities’ bond insurer. CalPERS alleges that Winston & Strawn, counsel for NPFG, hired lawyers from K&L Gates that had previously worked […]

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California Public Policy Center Estimates CA Debt in Excess of $1.1 Trillion

A recent study by the California Public Policy Center concluded that the combined debt owed by California’s state and local government entities is likely to exceed $1.1 trillion dollars. The CPPC totaled the debt of state government ($132.6 billion), public school districts ($49.7 billion), city governments ($68.1 billion), county governments ($22.1 billion), redevelopment agencies and […]

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