US Bankruptcy Judge Mary France has ruled that the bankruptcy petition filed by the majority of the city’s council members under Chapter 9 of the Bankruptcy Code is null and void. At a hearing to decide on the petition, Judge France ruled that the council was not authorized to file the petition.
In her judgment, France said, “For Chapter 9 bankruptcy to work, all of the branches of the municipality must be on the same page. Therefore I find that city council was not authorized to file the petition on Oct. 11.” Harrisburg Mayor Linda Thompson and Pennsylvania State Governor Tom Corbett had not supported the bankruptcy filing. Other parties that opposed the bankruptcy were Harrisburg’s Fraternal Order of Police and the American Federation of State, County and Municipal Employees through their local affiliates.
The council members who filed for Chapter 9 bankruptcy are considering an appeal.
Now things point to Harrisburg being placed under receivership. In October, governor Corbett appointed David Unkovic, lead attorney for the state economic development division, as receiver. Under Pennsylvania law, Unkovic’s appointment must be endorsed by a state court.
The material part of the law is Pennsylvania Act 26. In the hearing, Judge France asked lawyers from both sides to present their arguments on whether Act 26 is unconstitutional. Basically, Act 26 states that cities of Harrisburg’s size (pop. 49,500) are disallowed from filing for bankruptcy before July 2012. Act 26 was specifically brought up by lawyers representing Mayor Thompson and Governor Corbett as prohibitive to the bankruptcy filing.
Judge France found Act 26 to be constitutional and further added that the city council does not have the authority to unilaterally file for bankruptcy.
Harrisburg’s debts stem from improvements made to the city incinerator that is unable to generate sufficient revenue to cover the debts. The state owes $242 million to bondholders, with $65 million already overdue.
The bond market’s reaction to the judgment could not be immediately determined because of the Thanksgiving holiday weekend. But generally, market analysts believe that the judgment would augur well for the municipal bond market.
Mayor Thompson recently revealed her $55.5 million budget for the year that begins in January that includes budgeted debt payments on the incinerator. The budget also includes the sale or lease of city assets aimed at raising $93.6 million to cover the payments.
The city of Harrisburg, Jefferson County in Alabama and Central Falls in Rhode Island are 3 municipalities that have filed for bankruptcy this year. Now that Harrisburg’s filing has been thrown out (pending any appeal), it leaves Jefferson and Central Falls as the two municipality bankruptcies in the country. Since September 30, city and county debts have risen to more than $1.3 billion. This is more than two times the amount of debt from the previous three quarters combined, according to the Distressed Debt Securities Newsletter in Miami Lakes, Florida.
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Filed under Chapter 7 (Tampa) by on Nov 24th, 2011. Comment. 
The settlement of a dispute between bondholders could become a giant step towards the Las Vegas monorail exiting bankruptcy. The settlement entails second-tier bondholders paying $400,000 to first-tier bondholders out of a reserve fund. All other claims the two had made on each other’s money will be dropped. Both parties will now seek bankruptcy court approval to ask a Minnesota state court to sanction the deal thus ending a complex legal fight that has tied up the monorail case for months.
The original settlement agreement did not satisfy the bondholders because of the unfavorable terms they were offered, namely repayment of $44.5 million in three separate IOUs, which amounted to less than 10% of what they are owed.
The legal tussle began when the monorail project went into default and the $500.2 million owed to the first tier bondholders far exceeded the value of the monorail itself, meaning there was no way to repay any part of the $158.7 million owed to the second tier bondholders. However, the first tier bonds were covered by insurance from Ambac Assurance Corp. But Ambac itself ran into financial difficulties and went under receivership. That was when second tier bond trustee U.S. Bank filed a suit to recover whatever was left.
As if that was not enough, there was a third set of uninsured bonds of $49.5 million that was also wiped out by the saga. This money went into buying the original monorail, which ran between MGM Grand and Bally’s and subsequently extending it north to the Sahara 11 years ago.
The deal between the bondholders would have a significant impact on the reorganization process of the monorail. According to the monorail’s attorney, if Bankruptcy Judge Bruce Markell approves the deal, it would mean that “the hearing to approve the (monorail reorganization) plan will be simplified, taking less time from the court and counsel.”
This is seen by most as the final hurdle to ending the Chapter 11 bankruptcy case for Las Vegas monorail that began in January 2010. At that time, bondholders took over the collection from ticket sales and did what they thought best to keep operations ongoing.
Susan Freeman, attorney for Wells Fargo Bank, the trustee for the bondholders, said that the monorail and the first-tier bond holders have not yet settled all their differences. However, she declined to mention what other points of contention remain, other than to say negotiations are still going on.
But even upon exiting bankruptcy, the Las Vegas Monorail still has plenty of major challenges ahead. It is due for major overhauls by the end of the decade and currently, it does not have the funds for it. In addition, it will need fresh injection of cash to extend its route to McCarran International Airport to increase its passenger load that has been in decline for the past few years.
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Filed under Chapter 7 (Tampa) by on Sep 12th, 2011. Comment.
The city of Central Falls in Rhode Island has filed for bankruptcy on August 1. This has led to severe cuts in workers’ benefits and disruption to city services.
About 18,000 people live in Central Falls, a city located north of Providence, which is the state’s poorest municipality. For the current fiscal year that began July 1, the city is already projecting a deficit of $5.6 million. On top of that, the city also has $80 million in unfunded pension obligations it owes to 141 retired firefighters, police officers and their next of kin.
Central Falls went under receivership about 14 months ago and since then has had to pay about $800,000 in concessions it negotiated with the union and non-union workers. In recent times, many job vacancies have not been filled and city-owned buildings have been closed. The city lacks some basic services and infrastructure and this situation will only worsen as more federal cuts in funding are imposed.
One example is the library which was ordered closed by the city’s receivers July 1. The library staff lost their jobs and the community lost a vital resource center. A month later, the library reopened manned by volunteers but only on certain days – Mondays, Wednesdays and Fridays to be exact, between 12 to 5 p.m. Because the Central Falls has not kept up its payments to the statewide library system, city residents are not permitted to borrow books from the libraries of neighboring cities.
Likewise the city’s community center has been closed with no sign of reopening. Market talk has it that the Progresso Latino group may buy up the facility but nothing has been confirmed. Firefighters and other city workers face the prospect of further cuts in their salaries and benefits. The city’s receiver has proposed a 50% cut in their pensions and that they bear 20% of their health costs.
The official unemployment rate in the city is a staggering 15% but the actual figure may be even higher. About a hundred years ago, many immigrants from as far as the Middle East came to Central Falls and the surrounding regions seeking jobs in the manufacturing industry. Many found jobs in the textile mills but today these jobs have all but disappeared. According to the statistics, the median family income is $26,844 and more than 40% of those under the age of 18 live below the official poverty line.
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Filed under Chapter 7 (Tampa) by on Aug 16th, 2011. Comment.
The owner of Jamestown Mall who is based in New York has filed for Chapter 11 bankruptcy in federal court in St. Louis. Jamestown Mall Realty Management LLC listed its assets and liabilities at between $1 million and $10 million. Its unsecured creditors include $127,000 owed to Ameren, $121,000 owed to the IRS and $29,000 owed to the Missouri Department of Revenue.
Jamestown Mall Realty Management is looking for a potential investor who is willing to buy the property. The 1.25 million square foot premise was bought in 2009 for $3.3 million. Other companies, like Macy’s own other parts of the building like the anchor tenant space.
MSC Real Estate, one of Jamestown Mall’s creditors, say that the shopping center defaulted on a loan of more than $2 million in mid-June and was placed under receivership, forcing MSC to take legal action to foreclose the property. Then Jamestown filed for bankruptcy.
As part of MSC’s legal action, Town and Country-based Priority Properties was appointed the new manager of the shopping center in June. Priority Properties’ property manager, Mike Margiotta confirmed the take-over and said the mall’s operations will continue as normal during the legal action. “We’re going to operate the mall in a safe and clean manner, no changes at all,” Margiotta said.
Jamestown mall, opened in 1973, is located in St. Louis, north St. Louis county. Its occupancy has fallen to below 44% in recent years but St. Louis County officials announced a major makeover for the mall in May that includes the development of new housing nearby in May. That plan, to be phased in over 15 years, envisioned a $300 million redevelopment.
Despite the bankruptcy filing, County officials say the redevelopment plans remain unchanged. According to Mike Jones, senior policy advisor to St. Louis County executive Charlie Dooley, the bankruptcy filing ‘”has no impact on our plan and what we believe are the long-term prospects for the property.” Jones also confirmed that the County will work closely with the new owners of Jamestown Mall.
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Filed under Chapter 7 (Tampa) by on Aug 13th, 2011. Comment.
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Filed under Chapter 7 (Tampa) by on Mar 1st, 2011. 1 Comment.
