HomeMy WebLinkAboutItem 4.05 Muni Bankruptcy BillG~~~ OF DpB~~
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STAFFREPORT CITY CLERK
DUBLIN CITY COUNCIL File # ^~~~0 -~~
DATE: September 7, 2010
TO: Honorable Mayor and City Councilmembers
FROM: Joni Pattillo, City Manager
SUBJE . Governor Veto Request for AB 155 - Municipal Bankruptcy Bill
Prepared By: Roger Bradley, Senior Administrative Analyst
EXECUTIVE SUMMARY:
The City Council will consider authorizing the Mayor to send a letter, on behalf of the City
Council, to Governor Schwarzenegger requesting his veto of AB 155 (Mendoza), the Municipal
Bankruptcy Bill.
FINANCIAL IMPACT:
None.
RECOMMENDATION:
Staff recommends that the City Council authorize the Mayor to send a letter, on behalf of the
City Council, to Governor Schwarzenegger requesting a veto of AB 155.
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Submitte By Revie
Senior Adminis rative Analyst Assistant City Manager
Page 1 of 2 ITEM NO. `T •~
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DESCRIPTION:
As the State of California Legislature approaches the end of its 2010 session, it is widely
expected that Assembly Bill 155 (Mendoza), which imposes costly delays and impediments for
local agencies in fiscal distress, will be passed by the Legislature and placed on the Governor's
desk for signature or veto. AB 155 is known as the Municipal Bankruptcy Bill, and is legislation
by the California Professional Firefighters. The City of Dublin has been asked by the League of
California Cities to oppose AB 155 (Mendoza) and send a letter to Governor Schwarzenegger
asking for his veto of the bill, should it be passed by the Legislature.
Under existing law, any taxing agency or instrumentality of the State may file a petition and
pursue bankruptcy proceedings to completion as permitted under the laws of the United States.
This bill would provide that a local entity may only file under federal bankruptcy law with the
approval of the California Debt and Investment Advisory Commission, and it sets forth specific
conditions and processes for the same.
According to the League of California Cities, this legislation is an effort by the sponsors - by
establishing a process with extensive delays - to gain leverage over a fiscally distressed local
agency that finds itself out of options. Local agencies that do not have the revenue to meet
their obligations will be unable to immediately formulate a debt readjustment plan. It is unclear
what will happen to agencies that are unable to pay their obligations.
Municipal bankruptcy is a last resort option for local officials and has been rarely used by cities
and counties. However, in those few instances when it is needed, local agencies should
continue to have immediate access to the protections of bankruptcy court where neutral judges
trained in the subject matter can evaluate petitions and rule accordingly. Thus, there is no need
for this bill. Moreover, this legislation attempts to impede local flexibility in resolving these
financial matters.
In order to ensure local control of this topic, Staff is recommending that the City Council
authorize the Mayor to send a letter (Attachment 1), on behalf of the City Council, to Governor
Schwarzenegger requesting his veto of AB 155 (Mendoza).
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
None.
ATTACHMENTS: 1. Letter Requesting Governor Schwarzenegger's Veto of AB 155
(Mendoza).
Page 2 of 2
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August 30, 2010
The Honorable Arnold Schwarzenegger
Governor, State of California
State Capitol, First Floor
Sacramento, CA 95814
RE: REQUEST FOR VETO: AB 155 (Mendozal Local Government: Impediments to Bankruptcv
Governor Schwarzenegger:
On behalf of the City of Dublin, I request your veto on AB 155 (Mendoza). AB 155 creates procedural
obstructions and delays for fiscally distressed local agencies that may need the protections offered by
federal bankruptcy law. The late amendments added to the bill on August 20, 2010 do not
fundamentally change it and fail to address our continued concerns.
This legislation is an effort by the sponsors - by establishing a process with extensive delays - to gain
leverage over a fiscally distressed local agency that finds itself out of options. Local agencies that do not
have the revenue to meet their obligations will be unable to immediately secure the "breathing space"
necessary to formulate a debt readjustment plan. It is unclear what will happen to agencies that are
unable to pay their obligations.
Municipal bankruptcy is a last resort option that is never taken lightly by local officials and has been
rarely used by cities and counties. However, in those few instances when it is needed, local agencies
should continue to have immediate access to the protections of bankruptcy court, where neutral judges
trained in the subject matter can evaluate petitions and rule accordingly. Thus, there is no need for this
bill. The sponsors have submitted no evidence that the existing process has been abused.
For these reasons, the City of Dublin respectfully requests your veto of AB 155 and its special-interest
motivations, to preserve the option for local agencies to proceed quickly to federal bankruptcy court in
those rare cases when necessary.
Sincerely,
Tim Sbranti
Mayor
cc: City Council
Assembly Member Tony Mendoza
Natasha Karl, Legislative Representative, League of California Cities
Michael Webb, Legislative Deputy, Governor's Office
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ATTACHMENT 1
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