IBJNews

Indiana senator to push for municipal bankruptcy law

Back to TopCommentsE-mailPrintBookmark and Share

A northwestern Indiana lawmaker says he will push a measure next year that would change state law to allow local governments to file for bankruptcy like Detroit did in July.

Republican Sen. Ed Charbonneau of Valparaiso says it's time for Indiana to set up a process to make bankruptcy an option for distressed local governments when all other choices have been exhausted.

Federal bankruptcy laws allow municipal governments to seek Chapter 9 bankruptcy protection only if their state authorizes it. Only 28 states allow local government bankruptcies under various conditions.

A dozen states, including Michigan, allow municipal bankruptcies when state remedies have been unsuccessful. Other states allow local bankruptcies even if local officials don't seek state help, The Times in Munster reported.

Between 1980 and 2012, just 262 of the 55,000 local governments that can issue debt filed for bankruptcy, according to the Pew Charitable Trusts.

But Charbonneau said he believes Detroit's bankruptcy shows the need to have measures in place.

"These kinds of things are a possibility, and we need to get a plan in place to be able to address these situations when they arise," Charbonneau said.

Former Gov. Mitch Daniels signed a law in 2012 allowing the executive and fiscal bodies of a local government to jointly ask the state's Distressed Unit Appeals Board to designate their local government as distressed.

To receive the designation, the local government must meet one of eight conditions, such as defaulting on debt, skipping payroll or failing to pay vendors. If the criteria are met, the board then can appoint an emergency manager with powers to reduce the local government's spending, renegotiate labor contracts and audit its books.

If the effort fails, the only current options are to hire another emergency manager and try again.

Charbonneau said adding bankruptcy as an option can pressure the emergency manager and local officials into making the hard choices necessary to remain solvent.

"When you have that option, it encourages people to do a lot better job of seriously coming to the table to talk about issues and resolve them," he said.

Before its role was revised in 2012, the Distressed Unit Appeals Board permitted Gary to exceed the state's property tax caps for three years while the city adjusted its spending to match reduced revenues.

Overall, Indiana local governments generally are in better shape than Detroit. That's largely because of a constitutional cap on local government debt set at 2 percent of the value of all taxable property in the municipality and a pre-paid employee pension system administered statewide.

ADVERTISEMENT

  • Ridiculous
    Politicians preach to voters "Manage your financial matters, bankruptcy is not a way out when bad financial decisions are made". However, it is OK for cities and towns to declare bankruptcy as a pathway to getting out of paying pensions to workers who paid into the system for years. We need a referendum that blocks cities and towns from operating outside a balance budget, and block those same communities from raising sales taxes in order to spend more money on items the community cannot afford. Politicians are friends of sports franchises and business, not city and county employees.
  • Wasted
    I totally disagree with adding the option for bancruptcy and think its a cope out. It's too easy to throw up your hands and "give up" with bancruptcy. Hard choices should be made all the time not when you are facing bancruptcy. The majority of my work deals with tax supported entities and I see some of the most wasteful spending and stupid purchases by municipalities, schools and state governments. A lot of times it shows the laziness of those in charge of making decisions. If the emergency manager doesn't get it right during his/her term then he needs to be replaced immediately. And now this lawyer jumps in to "create" a case to keep himself busy and suck more money out of the county, town or city he is working for....what a waste of money.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Angela IS the best RD

  2. We are a nation of speed. All of our younger lives are filled with deadlines, quotas and bottom lines. We start to ease out of the pressured rat-race when we finally see "retirement." The most enjoyable travel on the planet is passenger rail service. Indy to Chicago does not beat Megabus or Southwest Airlines in speed. Passenger rail however has the best seating, mammoth legroon, seat backs that recline to more than 45 degrees and employers that really want you to return as a customer. Indiana municipalities need to maintain subsidies to support this transportation mode. Losing it is loss for all of us.

  3. Good day! I just want to testify how i got my loan from Mr. Eric Lefkofsky after i applied several times from various loan lenders who claimed to also testify right in this forum,i thought the testimonies where real and i applied but they never gave me loan. I was in need of an urgent loan to start a business and i applied from various loan lenders who promised to help but they never gave me the loan. Until a friend of mine introduce me to this popular Mr. Eric Lefkofsky who promised to help me and indeed he did as he promised without any form of delay. I never thought there are still reliable loan lenders until i met Mr. Eric lefkofsky who indeed helped me with the loan and changed my belief. I promised to share this testimony after I got my loan. I don't know if you are in any way in need of a genuine and urgent loan,free feel to contact Mr. Eric Lefkofsky via their email{grouponfunding@hotmail.com}

  4. Its a THUG issue. Bleecker Street and NYX are thug bars. They attract thugs of all races. Places that attract thugs need to be kicked out of Broad Ripple. Ain't nobody got time for that!

  5. Hello everyone, My name is Marian Gareth, I am from the Texas, United State, am here to testify of how i got my loan from Mr Andre Frank {frankloancompany@yahoo.com} after i applied Two times from various loan lenders who claimed to be lenders right in this forum,i thought their lending where real and i applied but they never gave me loan. I was in need of an urgent loan to start a business and i applied from various loan lenders who promised to help but they never gave me the loan.Until a friend of mine introduce me to Mr Andre Frank the C.E.O of Andre Frank Loan Company who promised to help me with a loan of my desire and he really did as he promised without any form of delay, I never thought there are still reliable loan lenders until i met Mr Andre Frank, who really help me with my loan and changed my lief for better. I don't know if you are in need of an urgent loan, free feel to contact Mr Andre Frank on his email{ Frankloancompany@yahoo.com} for help

ADVERTISEMENT