Bankruptcy all around
"Jefferson County confronts a crisis involving a sewer debt of $3.25 billion that was incurred under court order pursuant to the federal Clean Water Act. Which of the following courses of action should be taken by the county? Select One:
- Attempt to implement a plan under Chapter 9 of the federal bankruptcy law that would repudiate all or a significant part of the sewer debt.
- Default on the payment of the sewer debt and accept the appointment of a receiver for the sewer system with power to raise sewer rates within the limits of the law to remedy such default.
- Pay the sewer debt in full by reducing the amount payable from sewer revenues and using various tax revenues to pay a portion of the debt. "
First off, which answer is the average taxpayer or sewer bill payer going to choose if that is the way the options are presented? What would local residents ask if some version of that was asked of City of Pittsburgh residents? I find the introductory sentence pretty amazing. I guess ranting about 'unfunded mandates' would come across as too esoteric for voters. And just what is someone voting for if they pick option #3? What exactly are 'various tax revenues' and what exactly does a 'portion' amount to.
It really is true that semantics matter in referenda, just ask the folks coming up with competing versions of how a drink tax referendum will be phrased. That's something I have been trying to avoid as a topic, but there is an odd odd thing in some of the proposed referenda wording that I will get to in the future.
Bankruptcy is a timely topic, not only because of last week's news on the Pittsburgh pension liability, but also check out the letter to the editor in the Post Gazette last Tuesday suggesting that the Port Authority just go bankrupt. So as not to repeat myself, I have touched the surface of the legal morass that would result if the City of Pittsburgh were to enter into a formal federal bankruptcy. That was in Why Vallejo Matters, and Why Vallejo Matters part II.
I saw the letter to the editor from KZ's new blog on the transit negotiations (http://nocommuterleftbehind.wordpress.com) where he also discussed the letter to the editor. BTW, I really wonder if there is any official ATU blog out there, I've seen a few ATU friendly blogs, but as best I can tell nothing on the web site of the local ATU (driver's union) web site has been updated in years. One thing that is indisputable in these Port Authority contract negotiations, one side has an extensive public relations strategy and a well funded strategy at that... the other side is MIA on the PR front.
But the legal issues over a potential bankruptcy are even more muddled for a public authority like PAT than for the City of Pittsburgh. Could PAT go bankrupt? It certainly isn't impossible. Would the buses have to be sold off to pay off the accumulated health care liability that PAT didn't fund? What it would mean in the end is just too hard to quite figure out and the precedents for letting a large transit agency go into a Chapter 9 Federal bankruptcy are hard to find. I would say the one example is one from my first public finance class long ago which is the case of the Washington Public Power Supply System (WPPSS). Who ever let that be name exist, and the acronym it engendered ought to be fired since it is forever sounded out as 'Whoops'. But it was one of the classic examples of bad forecasting in itself and resulted in one of the largest Chapter 9 bankruptcies then and since. There was a time not long before it happened when the concept of WPPSS going bankrupt was completely inconceivable.