Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Analysts Debate the Effectiveness of Municipal Bankruptcy on Improving Cities
Author: Joel R. Glucksman
Date: August 22, 2013
Key Contacts
Back
Five years after the Great Recession began, a number of cities across the country are still struggling to recover from fiscal shortfalls, budgetary constraints, and financial mismanagement. As is well known, this has prompted many to seek protection under Chapter 9 – the municipal bankruptcy part of bankruptcy law. Although the media have generally focused on the bankruptcies of Jefferson County, Alabama, and Central Falls, Rhode Island, few filings have garnered as much national attention as that of Detroit, which recently filed the largest municipal bankruptcy in U.S. history.
However, analysts are now questioning whether this legal safeguard will truly help municipalities recover and return to economic vitality, or if the procedure is simply a band aid to a much more complex issue. Bloomberg News cited a statement made by David Skeel of the Weekly Standard, in which he called for more municipal bankruptcy proceedings as a way to encourage reforms and adjustments in municipal pension systems. Indeed, many of today’s municipal proceedings are due in large part to under-funded pension liabilities, but they are coupled with the millions of dollars in debt that cities owe to creditors. The combination has led to struggles over whether the pension systems or the creditors should be favored during insolvency proceedings.
Other analysts, however, argue that while bankruptcy proceedings may shed light on some of these issues, they may do little in the way of encouraging municipal reforms and implementing safeguards that might improve the financial management of city resources, Bloomberg explained. In addition, bankruptcies may not improve other aspects that play a role in city’s financial health, such as lowering unemployment rates, reducing crime, strengthening the tax system, or improving the housing and commercial markets.
There is no finite way to determine if municipal bankruptcies will lead to the long-term health of most cities. However, as more metropolitan areas struggle to meet their debt and pension obligations, it is one of the few resources they have to begin the recovery process.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
What Every Real Estate Investor Should Know Before Buying a Rental Property
Before buying a New Jersey rental property, an investor should verify realistic operating numbers, the property’s legal and regulatory status, lead-based paint and flood compliance, the existing leases and tenant protections, and the right ownership structure. A rental property is more than a piece of real estate; it is an operating business subject to legal, […]
Author: Donald M. Pepe
Can You Change an Irrevocable Trust in New Jersey?
In New Jersey, an irrevocable trust can sometimes be modified even though its name suggests otherwise, and one of the primary tools for doing so is a process called decanting. Whether decanting is available depends on the specific terms of the trust and the discretion given to the trustee. Key takeaways: New Jersey has no […]
Author: Marc J. Comer
How Intellectual Property Valuation Will Impact Business Transactions
Intellectual property valuation determines the monetary value of a business’s IP assets, and it drives outcomes in licensing deals, joint ventures, mergers and acquisitions, financing, and ownership disputes. The most valuable assets of a business are often the things that cannot be seen or touched: a proprietary process, a copyrighted work, brand recognition, or the […]
Author: Jay McDaniel
Data Center, Dark Fiber, and Lit Services Agreements in New Jersey: Key Terms and Legal Pitfalls
For New Jersey data center owners and operators, a service agreement may look routine when it is signed. The network is functioning, the vendor is meeting its installation schedule, and the parties have agreed on pricing and performance specifications. The provisions that seem most important at that stage are often the technical ones. That changes […]
Author: George McGowan
Fort Monmouth Redevelopment and the Transformation of Monmouth County Real Estate
The Fort Monmouth redevelopment has entered its execution phase, and it is repositioning the broader Monmouth County real estate market. When Netflix and the Fort Monmouth Economic Revitalization Authority closed on the 292-acre Mega Parcel in December 2025, the transaction did more than hand over a deed. It marked the moment Fort Monmouth stopped being […]
Author: Donald M. Pepe
Local Zoning and Land Use Rules Every New Jersey Rental Property Owner Should Understand
Owning a residential rental property in New Jersey involves more than finding tenants and collecting rent. Property owners must comply with a combination of state laws, municipal ordinances, building and housing codes, and zoning and land use regulations. These requirements can affect everything from the number of dwelling units permitted at a property to whether […]
Author: Donald M. Pepe
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.