Municipal Bankruptcy

Milwaukee Faces Bankruptcy, Police Cuts if Aid Deal Can’t Be Reached

Not reaching a deal on a massive bill increasing state aid to Wisconsin’s local governments will only increase the chances that Milwaukee runs out of money, forcing deep cuts to police and fire protection, while smaller communities around the state will also struggle to pay bills, the Associated Press reported. The urgent warnings came as Republican leaders who control the Senate and Assembly disagree on a key part of the plan — who determines whether the Milwaukee city and county can raise the local sales tax to pay for pension costs and emergency services. That disagreement has increased fears that the bill being worked on by Democratic Gov. Tony Evers, local communities, the GOP-controlled Legislature and groups representing police and firefighters among others, is in jeopardy of not passing. “Without question, my city’s budgetary situation is dire,” Milwaukee Mayor Cavalier Johnson told senators at a hearing Tuesday. Without an increase in state aid, the city faces potential bankruptcy in 2025 when federal COVID-19 relief funds run out. Wisconsin state law does not allow for cities to declare bankruptcy, which means that the legislature would have to vote to allow Milwaukee to take that step if no deal is reached and the city runs out of money as projected. Milwaukee is the only city in America of its size that can’t currently raise additional money by raising sales taxes, Johnson told lawmakers in arguing for giving it that power.
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A Receiver May File a Chapter 9 Petition over City Officials’ Objections

The requirement in chapter 9 to negotiate in good faith before filing is satisfied if the parties are ‘simply too far apart,’ says Bankruptcy Judge Chan.

First Circuit Says: PROMESA Fiscal Plans Can’t Be Challenged in Federal Court

Federal courts have no jurisdiction to review decisions by Puerto Rico’s Oversight Board regarding the reduction of pension benefits.
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