Indiana Bill Would Allow Cities to Declare Bankruptcy

A bill in the Indiana legislature would allow local governments to declare bankruptcy. Given Governor Mitch Daniels is backing this plan, I expect it to pass. Best of all, the bill gives an emergency manager the ability to renegotiate labor contracts, and approve or veto contracts, expenses, loans and hiring.

Please consider Bill would allow Indiana cities to declare bankruptcy

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.