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ABI Quick Poll Responses Mixed as to Whether Municipalities Should Be Required to Go Through Mediation Before Filing for Chapter 9

Contact: John Hartgen
             703-894-5935
             jhartgen@abiworld.org

ABI QUICK POLL RESPONSES MIXED AS TO WHETHER MUNICIPALITIES SHOULD BE REQUIRED TO GO THROUGH MEDIATION BEFORE FILING FOR CHAPTER 9

September 15, 2011, Alexandria, Va.— Though not achieving a majority, more respondents in a closely divided ABI Quick Poll thought that local governments should be required to first go through mediation before filing for chapter 9. Forty-nine percent agreed (30 percent “strongly agreed” and 19 percent “somewhat agreed”) and 44 percent disagreed (33 percent “strongly disagreed” and 11 percent “somewhat disagreed”) that mediation should be required prior to a municipal government filing for chapter 9. Five percent “did not know or had no opinion” on the question.
 
Chapter 9 of the Bankruptcy Code provides for the reorganization of municipalities (including cities and towns, as well as villages, counties, taxing districts, municipal utilities and school districts). Financially struggling towns and local governments looking to recover from the recent recession are finding it harder to restructure debts accrued for infrastructure costs, as well as employee-related costs for health care, pensions and wages. Alabama’s Jefferson County is trying to avert a chapter 9 filing by continuing to work on an agreement with creditors of a failed sewer-bond refinancing. Harrisburg, the capital of Pennsylvania, is still negotiating debt payments on an incinerator system that has had the city’s council discussing a chapter 9 filing since 2009.
 
In California, legislation designed to limit the discretion of cities, counties, special districts and other public agencies from filing for bankruptcy is headed to Gov. Jerry Brown (D) after passing the state legislature earlier this month. Assembly Bill 506 would bar local government agencies from filing for bankruptcy until they undergo mediation or hold a public hearing and declare a fiscal emergency threatening the health, safety or well-being of residents. The bill is a priority for public employee unions whose contracts might be disturbed by a chapter 9 filing.
 
 
ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes over 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.