Since municipal bankruptcy seems inevitable, what would that look like for the City of Oakland? Reorganization bankruptcies generally involve the restructuring of debt; how much of Oakland’s cash flow is currently consumed by the sort of debt service that could be reduced or eliminated in a Chapter 9 filing? Could city pensions be reduce…
Since municipal bankruptcy seems inevitable, what would that look like for the City of Oakland? Reorganization bankruptcies generally involve the restructuring of debt; how much of Oakland’s cash flow is currently consumed by the sort of debt service that could be reduced or eliminated in a Chapter 9 filing? Could city pensions be reduced also? Could labor contracts be unilaterally renegotiated?
And what are the political ramifications of bankruptcy? Are the elected officials responsible for the current problem looking forward to bankruptcy as a tactic to avoid responsibility for painful choices?
Bankruptcy is a federal proceeding and it empowers a federal judge to mediate between the city, its creditors, and the employees to which it has long-term obligations. That also means arbitrating among creditors and employees themselves who are not likely to be fully compensated for the debts they are owed, or the contractual commitments the city made. Affected elements will include third-party contracts, pension obligations, wages, loans, ... basically everything. And the judge will consider both the seniority of debt and obligations, was well as the arguments of the parties in mediation.
It would appear to be a long and difficult process for all, including residents who will see real impacts from the decisions made.
State law governs the process per section 53760 of the CA Government Code
Since municipal bankruptcy seems inevitable, what would that look like for the City of Oakland? Reorganization bankruptcies generally involve the restructuring of debt; how much of Oakland’s cash flow is currently consumed by the sort of debt service that could be reduced or eliminated in a Chapter 9 filing? Could city pensions be reduced also? Could labor contracts be unilaterally renegotiated?
And what are the political ramifications of bankruptcy? Are the elected officials responsible for the current problem looking forward to bankruptcy as a tactic to avoid responsibility for painful choices?
That's a good and complicated question. This NPR post form 2012 on Vallejo's bankruptcy outlines it a bit (the linked articles are also good):
https://www.npr.org/2012/07/11/156621232/what-happens-when-a-city-declares-bankruptcy
Bankruptcy is a federal proceeding and it empowers a federal judge to mediate between the city, its creditors, and the employees to which it has long-term obligations. That also means arbitrating among creditors and employees themselves who are not likely to be fully compensated for the debts they are owed, or the contractual commitments the city made. Affected elements will include third-party contracts, pension obligations, wages, loans, ... basically everything. And the judge will consider both the seniority of debt and obligations, was well as the arguments of the parties in mediation.
It would appear to be a long and difficult process for all, including residents who will see real impacts from the decisions made.
State law governs the process per section 53760 of the CA Government Code
https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=2.&title=5.&part=1.&chapter=4.&article=5.