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
Company Dissolved? Legal and Financial Consequences to Expect
A company is dissolved; legally, it ceases to exist. Accordingly, dissolution results in significant legal and financial consequences. It is a process that must be properly managed to avoid continuing liability. The Corporate Dissolution Process Corporate dissolution is the legal process of formally closing a corporation, paying its debts and distributing the remaining assets. Most […]
Author: Jay McDaniel
The Legal Implications of Signing a Triple Net Lease
A triple net lease is a commercial lease in which the tenant pays the property’s real estate taxes, insurance, and maintenance costs, known as the three nets, in addition to base rent. They are most often used in freestanding retail and office buildings and in large single-tenant industrial properties, with terms that typically run 10 […]
Author: Donald M. Pepe
When to Settle and When to Fight: A Litigator's Framework
Every lawsuit comes with a cost, and knowing when to settle a lawsuit is one of the most consequential decisions a business owner will face. Experienced litigators understand how to minimize cost and obtain certainty for their clients. For many business owners, the decision is viewed almost entirely through a financial lens: What will it cost […]
Author: Sean M. Pena
A Whistleblower Just Filed a Complaint Against Your Company: Here's What to Do Now
Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues? There is […]
Author: Sean M. Pena
Assignment for the Benefit of Creditors: An Alternative to Bankruptcy for Distressed Businesses
When a business reaches the point where it can no longer service its debts or otherwise resolve its liabilities, management is often faced with a difficult question: is a bankruptcy filing necessary or is there another way to perform an orderly liquidation or sale of the business assets? While Chapters 7 and 11 of the […]
Author: John D. Giampolo
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Author: George McGowan
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.