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Thread: Insolvency / Bankruptcy Erie County Can!

  1. #1
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    Insolvency / Bankruptcy Erie County Can!

    First some history

    A decade ago, Orange County entered the record books by becoming the largest municipal government in U.S. history to declare bankruptcy. This crisis stemmed from the county's inability to pay back billions of dollars in debts incurred by the county treasurer. A risky investment strategy that was supposed to provide interest income for cash-starved local governments had badly backfired. Left without viable alternatives - and with both state and federal officials ignoring their pleas for help - Orange County government officials decided to file for Chapter 9 bankruptcy on Dec. 6, 1994.

    http://www.ppic.org/main/commentary.asp?i=532

    Texas Law

    CHAPTER 140. MISCELLANEOUS FINANCIAL PROVISIONS AFFECTING MUNICIPALITIES, COUNTIES, AND OTHER LOCAL GOVERNMENTS
    Sec. 140.001. RELIEF UNDER FEDERAL BANKRUPTCY LAWS FOR MUNICIPALITY, TAXING DISTRICT, OR OTHER POLITICAL SUBDIVISION.
    (a) A municipality, taxing district, or other political subdivision that is subject to this section may proceed under all federal bankruptcy laws intended to relieve municipal indebtedness.
    (b) A municipality is subject to this section if it has the power to incur indebtedness through the action of its governing body. A taxing district or other political subdivision is subject to this section if it has the power to incur indebtedness either through the action of its governing body or through that of the county or municipality in which it is located.
    (c) The officials and governing body of the municipality, taxing district, or other political subdivision may adopt all proceedings and take any action necessary or convenient to fully avail the entity of the federal bankruptcy laws.
    Acts 1987, 70th Leg., ch. 149, Sec. 1, eff. Sept. 1, 1987

    http://www.capitol.state.tx.us/stat...0.000140.00.doc

    It has been done. This means it can be done!

    Municipal Insolvency- Federal Law Allows

    Municipalities are typically subject to two sets of potentially applicable insolvency regimes, one state and the other federal. State law governing municipal insolvencies can take myriad forms, including financial emergency and oversight laws and judicial receivership statutes.8 Federal law governing municipal insolvencies is set out in the Bankruptcy Code, particularly Chapters 1 and 9 thereof.9 Federal law makes clear that a municipality may be a “debtor” under the Bankruptcy Code only on a voluntary basis and then only to the extent that state law or a state officer empowered by state law specifically authorizes the same.10 Thus, state law must be referenced to determine whether and how a municipality might become a debtor under the United States Bankruptcy Code.11 Should the need arise, a municipality’s incentive to avail itself of the Bankruptcy Code (as opposed to state insolvency regimes) comes from (i) the benefits of the “automatic stay” provided under the Bankruptcy Code,12 and (ii) the ability to impose a binding debt reduction plan on creditors.13

    http://www.hklaw.com/Publications/N...00&Article=3193

    Yes We can do it!
    New York State Consolidated Laws
    Local Finance



    S 85.30 Petition of municipality; temporary stay of claims. A
    voluntary petition may be filed pursuant to this section by any
    municipality or, in the event a municipality refuses to file such
    petition after request by its emergency financial control board, or
    fails to do so within five days thereafter, the board may file a
    petition pursuant to this section on behalf of the municipality. The
    petition shall be filed in the supreme court in a county in which the
    municipality is located. The petition shall state: (a) that the
    municipality is unable to pay its debts or obligations as they mature;
    (b) that the municipality or its emergency financial control board
    intends to file with the court a repayment plan in compliance with the
    requirements of section 85.40 of this title; (c) the nature of the debts
    and obligations of the municipality which may be affected by the plan
    and the approximate amount thereof; and (d) the identities and addresses
    of creditors who may be affected by the plan or, in lieu thereof, the
    reason such identification is impracticable and a listing of creditors
    in a manner that is practicable in the circumstances. A petition filed
    pursuant to this section shall operate to prohibit the doing of any act,
    and to stay the commencement or continuation of any action or special
    proceeding in any court in any jurisdiction, seeking to apply or enforce
    against the municipality or any covered organization, or their funds,
    property, receivables or revenues, any order, judgment, lien, set-off or
    counterclaim relating to any contract, debt or obligation, direct or
    indirect, of the municipality, including but not limited to any bond,
    note or other evidence of indebtedness, or seeking the assessment, levy
    or collection of taxes by or for the municipality or the application of
    any funds, property, receivables or revenues of the municipality or any
    covered organization, for a period of ninety days; provided, however,
    that: (i) the stay may be vacated prior thereto if, upon motion of any
    creditor affected thereby, the court finds, after a hearing, that the
    petition was not filed in good faith; (ii) if a repayment plan for the
    municipality is filed within ninety days from the filing of the
    petition, or within such additional period of time as the court may find
    after a hearing is required to permit the preparation and filing of such
    a plan, the court shall extend the stay for such additional period of
    time as is required to permit the court to enter an order pursuant to
    section 85.40 of this title; (iii) any applicable statute of limitations
    shall be tolled during the period of any stay or extension thereof
    pursuant to this title; and (iv) during the period of any stay or
    extension thereof pursuant to this title, the municipality may expend
    moneys to maintain and provide such services and for such purposes as
    are determined to be necessary by its emergency financial control board.

    http://caselaw.lp.findlaw.com/nycodes/c59/a10.html
    Last edited by LHardy; October 9th, 2005 at 09:36 AM.

  2. #2
    Gold Member Night Owl's Avatar
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    Just asking. How do you know this would something our County leaders will be attentive to? The only way this will work is if it's implimented by the people we elected into office.

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    Tony Fracasso - Admin
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    Originally posted by Night Owl
    Just asking. How do you know this would something our County leaders will be attentive to? The only way this will work is if it's implimented by the people we elected into office.
    When are elected officials who are SUPPOSED to represent the common taxpayer hear from us. Either at meetings, petitions and or calls. I supposed protest with angry protestors yelling at them won't hurt either.

  4. #4
    Member ReformWNY's Avatar
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    I posted this a couple of months ago.
    I lived in OC when it happened.
    Did wonders for a county that was barely 30 years old in "real" time.
    "I know the man. he is not using a theasuarus."

  5. #5
    Member steven's Avatar
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    great info and definatly food for thought!
    People who wonder if the glass is half empty or full miss the point. The glass is refillable.

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    This is most important!

    S 85.80 Authority for municipality or (not "and") emergency financial Control
    board to file petition under federal statute. A municipality or its
    emergency financial control board in addition to, or in lieu of, filing
    a petition under this title, or the city of New York or the New York
    state financial control board, may file any petition with any United
    States district court or court of bankruptcy under any provision of the
    laws of the United States, now or hereafter in effect, for the
    composition or adjustment of municipal indebtedness. Nothing contained
    in this title shall be construed to limit the authorization granted by
    this section.


    http://caselaw.lp.findlaw.com/nycodes/c59/a10.html

    This is very important. NYS Law allows for the EC legislatrure to file for bankruptcy with this statute. Do they know this? If they do why would they not use it. Oh yeah they hope to raise taxes instead. Most people have no idea what the laws are. This includes our very own politicians.
    For if they know this is available to them and they do not act in the best interest of the people. They are truely taking us for a ride.

  7. #7
    moonshine
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    Nice work LHardy!

  8. #8
    Gold Member Night Owl's Avatar
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    Not possible-

    We are not under an "emergency financial Control board", if we were then it would have been a hard control board from the very beginning AND the State Comptroller wouldn't have given the Legislature time to prepare for a soft control board - it would have been installed on the spot thereafter his Audit of Erie County several months ago. Meaning the County would still have a chance to get it right without a hard control board.

    Bankruptcy would only come if the County is at/exceeded their taxing limit.

    If property tax had been raised for all 5 years that Giambra was in office AND if 2 sales tax increases were approved leaving the County under a fiscal crisis (such as this year), then yes a hard control board and/or the option of filing bankruptcy through the state would be acceptable.

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    Bankruptcy would only come if the County is at/exceeded their taxing limit.


    This may not be true. I am still trying to find law that states we "must" be at our taxing limit.
    There is a taxing limit but does it mean we can not file for bankruptcy until we reach it. Can anyone provide state statute that shows this?
    IE- Ability to pay comes into play once agian. It is like saying you can not bring down the price of a car because you haven't priced the car at its' highest value. So you go ahead and price it at it's highest value and sell none. Now you can bring down the price. In the mean time your local competetor is selling cars like hotcakes because his price is far less than yours. Now you have not only lost your loyal customers but potential new ones as well. Not good buisness.

    We must remember the law is all about the words that are used.
    Any word that is not used can not be conciderd. Every word and its' specific meaning are also very important. Don't let them fool you into believing something that is not written in law.
    As Pharoh said "Let it be written! Let it be done!"
    Last edited by LHardy; October 9th, 2005 at 11:01 PM.

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    Tony Fracasso - Admin
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    Originally posted by ReformWNY
    I posted this a couple of months ago.
    I lived in OC when it happened.
    Did wonders for a county that was barely 30 years old in "real" time.

    Did it or were you being sarcastic?

  11. #11
    Gold Member Night Owl's Avatar
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    Originally posted by LHardy
    We must remember the law is all about the words that are used.
    Any word that is not used can not be conciderd. Every word and its' specific meaning are also very important. Don't let them fool you into believing something that is not written in law.
    As Pharoh said
    Right - and with the law you quoted:

    S 85.80 Authority for municipality or (not "and") emergency financial Control board to file petition under federal statute. A municipality or its emergency financial control board in addition to, or in lieu of, filing a petition under this title, or the city of New York or the New York state financial control board, may file any petition with any United States district court or court of bankruptcy under any provision...
    We are not under an "emergency" control board, just a soft one. If the State Comptroller at the end of his audit installed an emergency control board on Erie County, then filing for bankruptcy under the law you provided may be an option - but not at this time, not with a soft control board.

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    Yes and if you will notice it states "or". This does not mean we are "required" to have an emergency board to do it. We need to have a law that states an "emergency control board must be in place". As of yet I have found no such law. Does it exist?
    Maybe but I'm not going to just take their word for it. Site us the law and prove it to the taxpayers.

  13. #13
    Gold Member Night Owl's Avatar
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    Originally posted by LHardy
    Yes and if you will notice it states "or". This does not mean we are "required" to have an emergency board to do it. We need to have a law that states an "emergency control board must be in place". As of yet I have found no such law. Does it exist?
    Maybe but I'm not going to just take their word for it. Site us the law and prove it to the taxpayers.
    However, if a municipality that does have further options for creating revenue it doesn't have to file bankruptcy.

    If the County were at its max of raising revenue and had no choice but to declare bankruptcy, don't you think the State Comptroller would have pointed that out and put it into effect at the very beginning? Especially by the State Comptroller.

    Property tax can still be raised as with sales tax. The County still has other alternatives, whether we want to see it or not.

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    However, if a municipality that does have further options for creating revenue it doesn't have to file bankruptcy.
    Governments do not create revenue. They take your money period.

    If the County were at its max of raising revenue and had no choice but to declare bankruptcy, don't you think the State Comptroller would have pointed that out and put it into effect at the very beginning? Especially by the State Comptroller.
    Revenue=tax to me and you. The comptroller is a politician in the buisness of keeping his job and money in the state coufers. He could care less about how much has to come out of your pocket to pay for it.

    Property tax can still be raised as with sales tax.
    Yes it can. Does htat make it good economic sense for an area near last in this country for economic growth? I would say not.

    Many corporations(delphi) and individuals file banckruptcy everyday. Yet we do not force them to expend all their capital before they file. Filing allows for reorginization and a new start. The problem is many will loose their jobs and take pay cuts. The unions don't want that to happen. Hence the push to go to the taxing limit. I have yet to see the law that states "we must be at our taxing limit before we can file". Honestly I don't believe that law exists and if it does show me. Anyone.
    If it does all the more reason for a hard control board so we can file. As the statute states the legislature can do it.

  15. #15
    Gold Member Night Owl's Avatar
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    Governments do not create revenue. They take your money period.

    Okay - I'll give you that one.

    Revenue=tax to me and you. The comptroller is a politician in the buisness of keeping his job and money in the state coufers. He could care less about how much has to come out of your pocket to pay for it.

    However, he still has a job to do when it comes to the state finances. Hevesi is in his job not to kiss off the little people (not intended to or about "little people" - little as in the average taxpayers). No matter what job people have or how they got it is no comparison to making sure the numbers don't get screwed up within that job.

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