The recent amendments fail to address the fundamental problems with this bill. It is certain that AB 155 will obstruct fiscally distressed local agencies from seeking the protections offered by federal bankruptcy law. Under Chapter 9, local agencies financially restructure while being protected, which allows them to continue to provide services to their communities and pay their employees.
Undermines recovery process. At its foundation, AB 155 undermines the principal benefits of federal bankruptcy protection under Chapter 9 including: 1) the automatic stay of financial obligations; 2) time to allow a debtor some “breathing space” to formulate a debt readjustment plan; and 3) keeping the doors open in order to provide services the public expects. As a result, AB 155 may lead local agencies to default, precisely the result that bankruptcy protection seeks to avoid.
Broadcasts financial situation sooner than necessary. AB 155 requires a local agency that is at or near insolvency to telegraph its financial situation to the financial marketplace much sooner than it might otherwise need to. This will limit any last-minute financial remedies that would assist in avoiding bankruptcy.
Squanders resources. AB 155 mandates extensive and an overly burdensome series of administrative steps for entities that find themselves in an untenable financial situation. The new administrative processes this bill sets up will require a significant amount of state and local government resources that are scarce. Additionally, this bill offers no help to local agencies that are expected to meet certain financial obligations and are unable to do so. In fact, it will only make a distressed municipality more unstable.
Wastes time. An agency that is fiscally distressed and requires bankruptcy protection does not have any time to waste. This bill gives the California Debt and Investment Advisory Commission (CDIAC) the authority to approve or deny a local government’s petition to move into bankruptcy court. But, the bill attempts to provide a local government an “override” option of CDIAC’s decision. So, what exactly is this bill seeking to do? This bill will waste valuable time for an agency in distress.
Encourages litigation. AB 155 creates opportunities for costly litigation that go beyond the scope of the current bankruptcy process, precisely when the local agency cannot afford the additional time or financial resources to respond.
The bottom line. AB 155 offers nothing to local agencies in fiscal distress except costly delays and the promise of additional litigation. The complications that will undoubtedly arise from this new hurdle have the potential to put the state at significant financial risk. The state will most certainly be responsible to communities whose agencies can no longer carry out federal- or state-mandated services or pay its debts because it was blocked from seeking Chapter 9 protection.
We urge your “no” vote on AB 155.
Opposition to AB 155
Local Government Groups Opposed:
Association of California Health Care Districts, Association of California Water Agencies, California Contract Cities Association, California Society of Municipal Finance Officers, California State Association of Counties, Regional Council of Rural Counties, Urban Counties Caucus, California Special Districts Association, League of California Cities, League of California Cities Inland Empire Division, League of California Cities Orange County Division, League of California Cities San Diego Division, Marin County Council of Mayors and Councilmembers, South Bay Cities Council of Governments and City Clerk’s Association of California.
Business & Taxpayer Groups Opposed:
Bay Area Council, California Chamber of Commerce, California Public Securities Association, Howard Jarvis Taxpayers Association, and, Los Angeles County Business Federation (BizFed).
Individual Counties Opposed:
Counties of Butte, Imperial, Nevada, Madera, Mendocino, Orange, Riverside, San Bernardino, San Luis Obispo, and Yolo.
Individual Cities Opposed:
Cities of Antioch, Adelanto, Agoura Hills, Albany, American Canyon, Apple Valley, Atascadero, Arvin, Azusa, Bell Gardens, Bellflower, Belmont, Benicia, Berkeley, Beverly Hills, Bishop, Blythe, Brea, Brisbane, Burbank, Burlingame, California City, Calistoga, Camarillo, Carmel-by-the- Sea, Carson, Carlsbad, Chowchilla, Chula Vista, Clayton, Cloverdale, Clovis, Coalinga, Colton, Commerce, Concord, Costa Mesa, Cotati, Covina, Cypress, Daly City, Danville, Diamond Bar, Dixon, El Cajon, El Segundo, Encinitas, Exeter, Fairfield, Folsom, Fontana, Foster City, Fountain Valley, Fowler, Fremont, Fullerton, Glendora, Gonzales, Greenfield, Guadalupe, Hanford, Healdsburg, Hermosa Beach, Highland, Hillsborough, Hollister, Hughson, Huntington Park, Huntington Beach, Huron, Imperial Beach, Irvine, Irwindale, Kingsburg, La Palma, La Puente, La Verne, Laguna Hills, Laguna Beach, Lake Forest, Lafayette, Lakewood, Lathrop, Lawndale, Lemoore, Lindsay, Livermore, Long Beach, Los Banos, Madera, Mammoth Lakes, Manhattan Beach, Manteca, Marysville, Maywood, Merced, Mendota, Mill Valley, Modesto, Monrovia, Monterey, Moreno Valley, Murrieta, Napa, Newport Beach, Norco, Norwalk, Novato, Oakdale, Oakland, Ontario, Oroville, Palmdale, Palo Alto, Paradise, Pasadena, Patterson, Pinole, Placentia, Pleasanton, Pomona, Poway, Rancho Cordova, Rancho Cucamonga, Red Bluff, Redwood City, Reedley, Ridgecrest, Rialto, Rio Vista, Riverbank, Rohnert Park, Rolling Hills Estates, Rosemead, Sacramento, San Diego, San Leandro, Salinas, Sanger, San Joaquin, San Luis Obispo, San Marcos, San Mateo, San Pablo, San Rafael, Santa Cruz, Santa Maria, Santa Rosa, Sausalito, Seaside, Sebastopol, Selma, Shafter, Signal Hill, South San Francisco, Stockton, Suisun City, Sunnyvale, Tehachapi, Tiburon, Torrance, Tracy, Tulare, Tustin, Union City, Vacaville, Vallejo, Villa Park, Visalia, Vista, Walnut Creek, Wasco, West Covina, West Hollywood, Westminster, Windsor, Woodlake, Woodland, Yorba Linda, Yountville, and Yucaipa.
Individual Special Districts Opposed:
Ambrose Recreation and Park District, Bear Valley Community Services District, Bell Canyon Community Services District, Bethel Island Municipal Improvement District, Boulder Creek Fire Protection District, Castroville Community Services District, Costa Mesa Sanitary District, Cucamonga Valley Water District, Dublin San Ramon Services District, El Dorado Hills Community Services District, Fulton-El Camino Recreation and Park District, Goleta Sanitary District, Goleta West Sanitary District, Hayward Area Recreation and Park District, Irvine Ranch Water District, Lincoln Rural County Fire Protection District, Mojave Desert Resource Conservation District, Montalvo Municipal Improvement District, Moss Landing Harbor District, Mountain House Community Services District, Municipal Water District of Orange County, Pine Grove Community Services District, Public Cemetery District No 1 of Kern County, San Diego County Fire Districts Association (Fire districts: Alpine, Bonita-Sunnyside, Borrego Springs, Deer Springs, Julian-Cuyamaca, Lakeside, Lower Sweetwater, North County, Pine Valley, Rancho Santa Fe, San Marcos, San Miguel Consolidated, San Diego Rural, Valley Center, Vista; Water districts: Mootamai, Pauma, Ramona, Rincon del Diablo, Yuima), San Miguel Consolidated Fire Protection District, South Tahoe Public Utility District, Squaw Valley Public Service District, Stallion Springs Community Services District, Stanislaus Consolidated Fire Protection District, Stockton East Water District, Three Valleys Municipal Water District, Trinity Center Community Services District, Tuxedo Country Club Rural County Fire Protection District, Ventura Port District, Vista Irrigation District, West County Wastewater District, Western Municipal Water District, Western Shasta Resource Conservation District.