Central Fall bankruptcy: sign of things to come? (Pittsburgh, Jefferson: credit, house)

[squarian]

Central Falls bankruptcy means a grim present for the 'city with a bright future' | Business | The Guardian

This sounds rather too familiar for comfort:

"What makes Central Falls particularly worrying is that the financial crisis is only a secondary factor in its collapse. This city's problems have been decades in the making and stem from a pension burden created for baby boomers who were promised far more than Central Falls – and many other US cities – can now afford."

[BrianTH]

A bankruptcy for the City of Pittsburgh might be its least bad option for dealing with its legacy costs. Problem is that to do that, it would need the state's permission.

[squarian]

The understated language here (p. 15, "Act 47 Issues") is rich:

http://pelcentral.org/wp-content/uploads/2011/02/MAGNY-Act-47-presentation-02112011.pdf (broken link)

Challenges of the Act 47 Process
– Recovery time period uncertain
– Legacy costs often extremely high – debt, pensions, health care
– Continuing population and economic decline of municipality
– Adjacent municipalities often unwilling to cooperate and/or
consolidate with their distressed neighbor
– Municipal officials’ compliance can be difficult
– Difficulty effecting Act 47 collective bargaining contract changes
“Catch 47”
– Revenue/Taxation
• Municipal boundaries v. economic boundaries
• School district participation is critical

Oh yes indeedy-bob with bells on.


AFAICT, the pertinent section of Act 47 for bankruptcy is as follows:

http://www.cityofsharon.net/PDF/Other/Act47.pdf

Subchapter D. Application of Federal Law
Section 261. Filing municipal debt adjustment under Federal law.
(a) Authorization. – In the event one of the following conditions is present, a municipality is hereby
authorized to file a municipal debt adjustment action pursuant to the Bankruptcy Code (11 U.S.C. 101
et seq.):
16
(1) After recommendation by the plan coordinator pursuant to section 241(6).
(2) Imminent jeopardy of an action by a creditor, claimant or supplier of goods or services which is
likely to substantially interrupt or restrict the continued ability of the municipality to provide
health or safety services to its citizens.
(3) One or more creditors of the municipality have rejected the proposed or adopted plan, and efforts
to negotiate resolution of their claims have been unsuccessful for a ten-day period.
(4) A condition substantially affecting the municipality’s financial distress is potentially solvable
only by utilizing a remedy exclusively available to the municipality through the Federal Municipal
Debt Readjustment Act (48 Stat. 798).
(5) A majority of the current or immediately preceding governing body of a municipality determined
to be financially distressed has failed to adopt a plan or to carry out the recommendations of the
coordinator pursuant to this act.
(b) Majority vote. – This authority may be exercised only upon the vote by a majority of the
municipality’s governing body

So it appears that per 261 (a)(5) there is a route to bankruptcy without the DECP's permission - but it would require real political courage and intransigence on the part of the city council. A majority would have to dig in, refuse point blank to carry out the coordinator recommendations, then vote to file for protection under Bankruptcy Code.

[BrianTH]

Note that Section 211 of Act 11 of 2004 contains a special rule for cities of the second class (the one and only of which being Pittsburgh).

[MathmanMathman]

It sounds as if Central Falls was mismanaged with overly generous retirement plans. After 20 years you get half of your final pay with full health benefits? I suppose the longer you stay the higher the percentage of pay you get?

On the old TribLive board, I recall one guy moaning about how he wished he was a Pittsburgh firefighter with its very generous retirement benefits. But ultimately, like they say, TANSTAAFL.

Plus

Originally Posted by Guardian

Alabama's Jefferson county looks set to become the largest municipal bankruptcy in US history, saddled with $3.2bn (£2bn) in debt it ran up on a new sewage system.

I wonder if we are getting to the point where large public projects are priced beyond what we can afford? I guess China can cut through all its internal "red tape" and get big projects done but here we have unions to appease and the EPA for environmental impact studies, etc. So, if you didn't build it 100 years ago, you probably can't afford to do it now?

[robrobrob]

Originally Posted by MathmanMathman

It sounds as if Central Falls was mismanaged with overly generous retirement plans. After 20 years you get half of your final pay with full health benefits? I suppose the longer you stay the higher the percentage of pay you get?

On the old TribLive board, I recall one guy moaning about how he wished he was a Pittsburgh firefighter with its very generous retirement benefits. But ultimately, like they say, TANSTAAFL.

Plus

I wonder if we are getting to the point where large public projects are priced beyond what we can afford? I guess China can cut through all its internal "red tape" and get big projects done but here we have unions to appease and the EPA for environmental impact studies, etc. So, if you didn't build it 100 years ago, you probably can't afford to do it now?

It is all priorities. We, in this case PennDot, paid 350,000 to restore a streetcar from the 1930's. Oops I am sorry there was 20,000 in private donations.

Who needs bridge's?

Now, I am all for the public sector helping out non-profits, museums, etc. but I do think that public donations should not exceed private donations. If the public doesn't care about it why should the government.

[squarian]

Originally Posted by BrianTH

Note that Section 211 of Act 11 of 2004 contains a special rule for cities of the second class (the one and only of which being Pittsburgh).

So I see. At least this power is vested in the Governor rather than the Gen Ass - thank heaven for small mercies.

[squarian]

Originally Posted by MathmanMathman

I guess China can cut through all its internal "red tape" and get big projects done but here we have unions to appease and the EPA for environmental impact studies, etc. So, if you didn't build it 100 years ago, you probably can't afford to do it now?

Large public works projects in China don't always benefit from a lack of administrative review:

Banqiao Dam - Wikipedia, the free encyclopedia

[squarian]

Originally Posted by robrobrob

If the public doesn't care about it why should the government.

Simply because the people who are in government (assuming the government is well-ordered to begin with) are often drawn from the better and wiser portion of the nation, so naturally they know better than the people at large.

If the Royal Opera House (Covent Garden) had to function on the basis of voluntary contributions, it would have closed sometime around 1905. Fortunately, successive Governments have supported it, because the people in government know better than the People.

[MathmanMathman]

Originally Posted by squarian

Large public works projects in China don't always benefit from a lack of administrative review:

Banqiao Dam - Wikipedia, the free encyclopedia

Yeah, but when you lose 171,000 people and leave 11 million people homeless. That's hard to sweep under the rug. Something like that happening in the US would be a much bigger legal mess than in China.

China built the Three Gorges Dam which required relocating over a million people. I doubt they agonized over its environmental impact.

China has been building HSR lines and even a Maglev line, the latter the US has been indecisive about for years.