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Category: Bankruptcy Law Published: Tuesday, 23 December 2014 Written by Admin

There have been approximately 660 Chapter 9 filings nationwide since 1937, mainly in small municipalities and taxing districts, says Chicago attorney James Spiotto, a municipal bankruptcy expert and managing director of financial consulting firm Chapman Strategic Advisors LLC.

Reasons for filing vary but often include troubled public development projects, unanticipated hefty legal judgments against a taxpayer-backed entity, or massive pension and bond debt payments that leave a municipality cash-strapped and unable to cover operating costs of employee salaries, vendor payments and other expenses.

US bankruptcy law requires government entities to obtain specific authorization from the state to file for Chapter 9, but theres no provision in Illinois to grant that authority to local governments, so technically filings arent permitted.

CASH-STRAPPED, WORRIED

Increasingly, though, local government officials statewide are discussing bankruptcy as a way to reorganize their troubled finances.

Mounting pension obligations and other debt, coupled with flat or declining tax revenues, are forcing local governments to slash services, increase fees and taxes and even borrow to make ends meet.

In a months-long investigation, released in August, the Better Government Association closely reviewed the finances of 217 police and fire pension funds in suburban Cook County.

The taxpayer-supported systems, with collective assets of nearly $5 billion, are intended to provide public safety workers and their families with stable retirement incomes.

But the collective unfunded liability of those pension funds is $3.3 billion, BGA Rescuing Illinois research determined. Moreover, dozens of the funds are in immediate financial peril.

READ MORE: Suburban Pension Peril

Money in dozens of Chicago-area police and fire pension funds is drying up - which should be a big worry not only for current and future retirees, but taxpayers, a BGA Rescuing Illinois investigation discovers.

Municipal leaders have told the BGA theyre looking to state lawmakers to reform the local police and fire pension systems, easing their financial burden, but a legislative fix doesnt appear imminent.

Meanwhile, the debts keep mounting.

Morrissey says Rockford isnt in danger of falling into bankruptcy anytime soon. But if the citys pension obligations and other debts arent brought under control it could cause problems down the road.



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