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Public Finance Lawyer Sees Fresh Wave of Chapter 9 Bankruptcies

Friday, 13 July 2012 09:49
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With today's news that San Bernardino is set to become the third California city to declare bankruptcy in recent weeks, municipal governments are starting to drop like flies.  Due to a host of fiscal issues, numerous municipalities are considering bankruptcy as the solution to their balance sheet nightmare.
David Dubrow of Arent Fox's Municipal Finance Group in New York sees a possible fresh wave of Chapter 9 bankruptcy filings by U.S. cities this year -- especially in Rhode Island, California, Pennsylvania, Michigan, Ohio, Indiana and other states.  Arent Fox represents major bond insurers, bondholders and trustee clients in several high-profile muni defaults, including Stockton and Hercules City, Calif.; Central Falls, R.I.; and Harrisburg, Penn.
"A lot of medium-sized cities around the country remain under fiscal distress, whether from structural deficits, depressed local real estate markets, an inability to raise taxes, heavy debt loads and especially unfunded pension liabilities," says Mr. Dubrow.
He also points to problems posed by big-ticket public works -- from sewer systems to waste disposal projects to new hospitals -- that ended up costing much more than projected, with less revenue available to cover their costs (see Harrisburg's $280 million incinerator).
"It's not that conditions are necessarily becoming more dire that will force a new crop of cities into bankruptcy," Mr. Dubrow notes.  "To the extent that some of the recent municipal bankruptcies can be successfully resolved in the view of the tax-exempt marketplace, that could represent a model of success that paves the way for other cities to follow suit with their own filings.  Central Falls in Rhode Island could be the case to watch as a bellwether Chapter 9 in 2012.?
Mr. Dubrow, who has represented a variety of major institutions in tax-exempt defaults, has also advised on municipal financings around the U.S. involving multifamily housing, hospitals, airports, schools, highways/bridges, subway systems industrial development, solid waste facilities -- the works.  He played a key role in advising Fannie Mae and Freddie Mac in launching two programs that created $24 billion in tax-exempt housing bonds and bank liquidity to support the U.S. residential finance market following theDavid Dubrow of Arent Fox's Municipal Finance Group in New York sees a possible fresh wave of Chapter 9 bankruptcy filings by U.S. cities this year -- especially in Rhode Island, California, Pennsylvania, Michigan, Ohio, Indiana and other states.  Arent Fox represents major bond insurers, bondholders and trustee clients in several high-profile muni defaults, including Stockton and Hercules City, Calif.; Central Falls, R.I.; and Harrisburg, Penn. financial crisis.
David Dubrow of Arent Fox's Municipal Finance Group in New York sees a possible fresh wave of Chapter 9 bankruptcy filings by U.S. cities this year -- especially in Rhode Island, California, Pennsylvania, Michigan, Ohio, Indiana and other states.

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