12/29/2010
Indiana lawmakers next year will take up a bill that would establish a process to aid financially struggling local governments, ultimately allowing them to file for municipal bankruptcy.
State Senator Ed Charbonneau, the bill's sponsor, said on Tuesday it would allow Indiana to join more than two dozen other states that allow units of local government to file for rarely used Chapter 9 bankruptcy.
"The bill is intended to get Indiana into a position where we are recognizing the realities of life these days not only in Indiana, but across the nation," said Charbonneau, a Republican.
Cities and states all over the United States have been hit hard by the economic recession, which has depressed revenue but increased demand for services.
The immediate catalyst for the bill was Indiana voters' approval in November of a measure putting an existing cap on local property taxes into the state constitution.
Charbonneau said that under current law, local governments could get relief from the cap from the Distressed Unit Appeal Board. Once the constitutional amendment takes effect in 2012 that board goes out of business, he added.
Under the bill, the board would be reconstituted and given the power to appoint an emergency manager to oversee a troubled local government. If the manager cannot get the local government back on track, the board could approve a bankruptcy filing, according to Charbonneau.
"I don't know of any government that needs this. My intent is to just make sure Indiana is prepared," he said, adding he hoped the bill's provisions would never have to be utilized.
Indiana Governor Mitch Daniels said it would be prudent to have a process in place "in the unfortunate event" that a city would need to access bankruptcy.
Indiana lawmakers next year will take up a bill that would establish a process to aid financially struggling local governments, ultimately allowing them to file for municipal bankruptcy.
State Senator Ed Charbonneau, the bill's sponsor, said on Tuesday it would allow Indiana to join more than two dozen other states that allow units of local government to file for rarely used Chapter 9 bankruptcy.
"The bill is intended to get Indiana into a position where we are recognizing the realities of life these days not only in Indiana, but across the nation," said Charbonneau, a Republican.
Cities and states all over the United States have been hit hard by the economic recession, which has depressed revenue but increased demand for services.
The immediate catalyst for the bill was Indiana voters' approval in November of a measure putting an existing cap on local property taxes into the state constitution.
Charbonneau said that under current law, local governments could get relief from the cap from the Distressed Unit Appeal Board. Once the constitutional amendment takes effect in 2012 that board goes out of business, he added.
Under the bill, the board would be reconstituted and given the power to appoint an emergency manager to oversee a troubled local government. If the manager cannot get the local government back on track, the board could approve a bankruptcy filing, according to Charbonneau.
"I don't know of any government that needs this. My intent is to just make sure Indiana is prepared," he said, adding he hoped the bill's provisions would never have to be utilized.
Indiana Governor Mitch Daniels said it would be prudent to have a process in place "in the unfortunate event" that a city would need to access bankruptcy.
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