City and county officials throughout California are doing everything they can to steer clear of filing for Chapter 9 Bankruptcy protection, California State Association of Counties Executive Director Paul McIntosh said.
Media reports in recent months have been either inaccurate or overblown regarding requests by elected officials – in places that have included the City of Stockton and Sacramento County among others – for staff to research bankruptcy protection as they face multi-million budget shortfalls and shrinking incomes, he said.
“Somebody requests information and it’s reported in the media as an option,” McIntosh said. “The County of Sacramento, it was never a consideration. They were just doing their due diligence.”
That overreaction, McIntosh said, could prove harmful to agencies that have for years applied for Tax and Revenue Anticipation Notes (TRANS) through CSAC. As McIntosh deals with investors and rating agencies, rumors of city and county bankruptcy filings makes backing for the short term loans a much tougher sell.
After all, who would want to invest in a company that might file for bankruptcy?
“This year we have more than 30 agencies that will pool close to a billion dollars,” McIntosh said. “This is our eighteenth year doing this, but there’s limited access to credit markets right now because of the state’s financial picture.”
Most years, McIntosh said CSAC would buy bond insurance, but this year insurance is not available. Instead, he’s working ways to ease credit limitations.
McIntosh is fed up with media speculation that elected officials would lean on bankruptcy as an “easy way out.” He also said that the City of Vallejo’s 2008 filing was a major exception to the rule.
“Elected officials take their role very seriously to begin with, and care about the communities they’re serving,” McIntosh said. “Elected officials care about and want the best for their employees.”
McIntosh said TRANS is one way that cities and counties in California are getting an infusion of cash. TRANS are short term loans paid back in nine to 12 months. Cities and counties in line for the loans should receive funding before the new fiscal year.
This year’s TRANS participants are:
Town of Fairfax
Town of Paradise
Belmont Fire Protection District
Cameron Park Community Services District
North Tahoe Fire Protection District