Are there Alternatives to Municipal Bankruptcy?

 

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eBlog, 7/18/16

In this morning’s eBlog, even as neighboring Cleveland is hosting the GOP convention,  East Cleveland awaits  a response from the State of Ohio vis-à-vis its  authority to file for chapter 9 municipal bankruptcy, even as it also considers whether it might instead—if the City of Cleveland is willing—annex with Cleveland.  In Ohio, a state which has authorized municipal bankruptcy, there has never been one. Ohio may place East Cleveland on fiscal watch, and the state auditor may provide technical and support services to a municipality—a  watch triggered  by a  written request from the municipality or  by the state auditor. The existence of a fiscal emergency condition in Ohio is determined by the state auditor—and may be initiated by the Governor, a city or county’s presiding officer, or the state auditor upon the occurrence of which, a financial planning and supervision commission is created to intervene . Should there be an East Cleveland default, the state is authorized to create a financial planning and supervision commission to intervene in the city’s fiscal affairs.

Is there an Alternative to Municipal Bankruptcy? On June 23rd, the East Cleveland City Council issued a Press Release to begin a search for candidates who would be on the Annexation (Merger) Commission where three individuals would be named to lead negotiations with the City of Cleveland. This would lead to legislation to be adopted by Council once the three people have been identified. This is a major step in the process. The deadline for individuals that met the requirements to submit their resumes was last June17th. The deadline was extended from June 3rd. City Council is now in the process of reviewing resumes and will narrow their selection down to five people who will be interviewed by Council members. A backup group will also be selected should someone be unable to fulfil the obligations of the Commission through the process. The Annexation Commission’s goal will be to research, collaborate, negotiate, and make recommendations to City leaders. The other option that will be taking place is a feasibility study that will be conducted by Conway MacKenzie, a national financial and management consulting firm that specializes in crisis management and turnaround. Lastly, the City has also explored chapter 9 municipal bankruptcy as an option to secure the remaining few assets it has so that the city can continue to function while these solutions are being implemented. The City Council vows it will continue to update residents through community meetings and notifications.

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