A second edition of Chapman and Cutler LLP's "Municipalities in Distress" was released Wednesday, four years after book's debut at a time when municipal bankruptcies have slowed.
The book by James Spiotto, managing director of Chapman Strategic Advisors, Ann Acker, director at Chapman Strategic Advisors, and Chapman and Cutler LLP partner Laura Appleby, adds 150 new pages to the original 2012 edition that includes lessons learned from bankruptcies in Detroit, Stockton, Calif. and San Bernardino, Calif. The expanded guide, which provides best practices and legal remedies on a state-by-state basis for municipal market participants, also includes additional information on bondholder rights and remedies and expended content on debt resolution mechanisms.
Appleby said during a launch event for the book at the Harvard Club in New York that large municipal bankruptcies that some forecasted four years ago have not panned out, with only 17 Chapter 9 filings since 2014 in mainly small special districts. She attributes the small number, which has dropped from 10 in 2014 to four so far this year, to stronger fiscal oversight in many states and in the case of Harrisburg, Pa. to laws on the books that prevented bankruptcy filings.
"Since the first edition of the book….we haven't seen a lot of large municipalities file," said Appleby. "There are states that have provisions on their books to help either restructure or monitor municipalities that are in distress and they are really stepping in to try and stop their municipalities or try to help their municipalities out of the trouble rather than relying on the federal bankruptcy process."
Spiotto said he is not surprised by the lack of municipal bankruptcies in recent years pointing to how no city, town, village or county has filed since July 2013. He said in addition to improved state controls, the drop is also due to government finance leaders seeing the many difficulties and challenges Detroit experienced during its bankruptcy proceedings
"People saw the difficulty they had in Detroit," he said. "That was a real wakeup call."
