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Bill Allowing Cities to Declare Bankruptcy Near Death

By Brandon Smith

Posted April 21, 2011

A proposal to help cities get out from under crushing debts has been pulled from consideration and could be dead for the year. The senate has already approved a plan to let cities ask the state to appoint an emergency manager to slash spending and find other efficiencies to balance red ink-stained budgets.

But Valparaiso Republican Ed Soliday yanked the bill from the house floor after legislators voted 50-41 to delete the option of declaring bankruptcy if the emergency manager can‘t solve the problem.

Soliday calls the bankruptcy provision "absolutely critical" to the bill. He says it‘s doubtful any city would use that option, but says without having the possibility of Chapter 9 protection, there‘s no incentive for a city to take the extreme step of turning over its fiscal powers to an outsider.

Huntington Republican Dan Leonard, who introduced the amendment, says it‘s irresponsible for a city to even consider leaving creditors on the hook for money they‘re owed.

Just eight Democrats voted to keep the bankruptcy option available, a tally which left Soliday frustrated. 26 Democrats joined 24 Republicans to strip the bankruptcy provision, while Soliday and 32 other republicans voted ‘no'.

Soliday says it‘ll be up to house and senate leaders to decide whether and how to resurrect the bill before the legislature adjourns April 29.

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