KeNo's Housing and Economic Portal: Wednesday January 5 Housing and Economic stories

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Bill would allow Indiana cities to declare bankruptcy - (www.courier-journal.com) A plan backed by Gov. Mitch Daniels would allow local governments in Indiana to ask for a state takeover and declare bankruptcy if necessary. Daniels says he hopes there won't be many local governments that seek bankruptcy, but says the state needs to have the law clarified and on standby in case it happens. Republican state Sen. Ed Charbonneau of Valparaiso is sponsoring a bill to outline the procedure. His bill would allow a local government in financial trouble to ask the Indiana Distressed Unit Appeals Board to appoint an “emergency manager” to run the government. The emergency manager would have the power to cut the budget, renegotiate labor contracts, and approve or veto contracts, expenses, loans and hiring. The bill states that if the emergency manager can't turn around the local government's finances, the unit would be allowed to seek federal bankruptcy protection. The State Board of Accounts in recent audits has questioned the abilities of the city governments in Gary and Lake Station to “continue as a going concern” because of continued high city spending despite significantly reduced city revenues because of statewide property tax caps. I salute this bill and look forward to the bankruptcy of a handful of Indiana cities. Gary has a population of around 100,000 and is Indiana's fifth largest city. Lake Station has a population of about 14,000.

Robo-signing paperwork problems hit California, slow foreclosures - (www.centralvalleybusinesstimes.com) The foreclosure robo-signing controversy continued to play a major role in foreclosure activity through the end of November, even spreading to non-judicial states like California, slowing the pace of foreclosures, according to a report Wednesday from ForecosureRadar Inc., a Discovery Bay-based real estate information company. A number of foreclosure statistics have dropped to levels not seen since 2008 as a result, the report says. “Without news of a corresponding drop in delinquencies, or a major increase in foreclosure alternatives, it is hard to find any reasonable explanation other than robo-signing and the likely self-imposed slow-downs that ensued to complete procedural reviews and other changes at the major servicers,” it says.

Southern Indiana town may file for bankruptcy protection - (www.indianalawblog.com) Facing a debt of $1.45 million over a long-delayed sewage plant project, the Floyd County town of Georgetown has taken the first step toward what would be an unprecedented move for an Indiana municipality — filing for bankruptcy protection. Whether Georgetown could do that, however, is in dispute. State officials say Indiana law doesn't authorize a town to declare bankruptcy. Georgetown's leaders “have no authority” to declare the town bankrupt, said Brian Bailey, general counsel for the Indiana Department of Local Government Finance. Bailey cited a 1994 update to the federal bankruptcy code that says a municipality “must be specifically authorized” by state law to be a debtor, and no Indiana law does that. (Kentucky law authorizes its local governments to file for bankruptcy, but none have ever done so.) Georgetown Town Council President Billy Stewart said there may be no other option. “There's no way for Georgetown to pay” its debts, he said. “We don't have it.” Look for Georgetown, Indiana population approximately 3,000 to see bankruptcy protection if allowed.

Law would let cities declare bankruptcy - (www.nwitimes.com) State Sen. Ed Charbonneau, R-Valparaiso, is sponsoring Senate Bill 105, which would repurpose the Indiana Distressed Unit Appeals Board from providing property tax cap relief to supervising direct management of a local government. Gary twice has won DUAB permission to charge the highest property tax rates in the state to bring its city budget into balance. Under Charbonneau's bill to restructure DUAB, the council and executive of a local government could jointly seek to be designated a "distressed unit" if it meets one of eight financial criteria. Or, a coalition of a government's creditors owed more than 30 percent of the unit's anticipated annual revenue could ask DUAB to declare a local government distressed.
If DUAB agreed the local government were distressed, DUAB would appoint an "emergency manager" with the powers of both the council and executive, who could slash the budget; renegotiate labor contracts; review salaries; approve or veto contracts, expenses, loans and hiring; and audit the books -- all independently of the government's elected officials. The emergency manager would not be allowed to raise taxes and would be required to work with elected officials to develop a financial plan for the future, according to the legislation.

Senator Sanders's Socialism - (economix.blogs.nytimes.com) When the rumpled, plain-spoken Senator Bernie Sanders of Vermont spoke virtually nonstop for more than eight hours on Dec. 10 to explain his opposition to tax cuts for the rich, he quickly became a YouTube and Twitter celebrity. Bernie Sanders of Vermont, a sharp critic of the Federal Reserve, forced its disclosure of details of its lending and bailout practices. A majority of Americans polled earlier this year by New York Times/CBS News,Bloomberg News and USA Today/Gallupalso opposed these cuts, and many cheered him on as he spoke. President Obama’s firm support for a compromise on the tax cut — which Congress approved late Thursday night — helped swing many voters back into approval, but the debate publicized the issue of economic inequality. Senator Sanders, who describes himself as a democratic socialist, describes the United States economy as “socialism for the rich.” Earlier in the year, he allied with Representative Ron Paul, Republican of Texas, to win support for new legislation requiring an unprecedented level of disclosure of the Federal Reserve’s specific emergency lending activities. With that process of disclosure now under way, Senator Sanders can offer details from the Fed’s “bailout files” to substantiate his claim that the $700 billion Troubled Asset Relief Program was pocket change compared with the trillions of dollars in low-interest loans the central bank provided both to American corporations and foreign agencies.