%1

Wisconsin has handed cash-strapped Milwaukee a lifeline to stave off bankruptcy, allowing the city to raise sales taxes without voter approval as part of a larger local government and K-12 schools funding plan, according to a bipartisan deal announced Thursday by Democratic Gov. Tony Evers and Republican lawmakers, the Associated Press reported. Evers called it a “transformative” deal that will rescue Milwaukee from the threat of bankruptcy, “something that would have devastating consequences for communities in every corner of our state and our state economy as a whole.” As part of the deal, the GOP-controlled Legislature agreed to spending an additional $1 billion on K-12 schools, along with increasing payments to families whose children attend taxpayer-funded private voucher schools. The much-discussed local government funding plan has taken on urgency in the Legislature this year. Milwaukee officials have warned about dire consequences and deep cuts as the city faces bankruptcy by 2025. Milwaukee Mayor Cavalier Johnson warned lawmakers of “catastrophic budget cuts” if a deal for more funding wasn’t reached. Milwaukee, the state’s largest city, faces an underfunded pension system. Milwaukee has increasingly become reliant on federal pandemic aid to fund its essential services, which city leaders have said cost $150 million more per year to maintain. The largest sticking point in reaching a new funding deal had been who would determine whether Milwaukee city and county can raise the local sales tax to pay for pension costs and emergency services.

With the City of Highland Park, Mich., on the losing end of 10 years worth of litigation with the Great Lakes Water Authority over unpaid water and sewer bills and $19 million hanging in the balance, Mayor Glenda McDonald asked the city council to approve petitioning the governor to allow the city to file for chapter 9 bankruptcy, ClickonDetroit.com reported. The legal road has run out for the city, and the millions of dollars it owes the GLWA are about to come due. “GLWA is asking to be able to turn off the water ‘This isn’t the case’ and put a levy on our properties,” said McDonald. Highland Park has a court date Thursday (April 20) in Wayne County Circuit Court and is so concerned a levy will be applied that the mayor and the city’s attorneys feel a bankruptcy filing is the only way to prevent it from happening. According to the city’s numbers, a levy on property taxes for the unpaid $19 million would increase property taxes threefold.

The city of Chester, Pa., can proceed to restructure in bankruptcy despite objections from its own elected officials and its biggest bondholder, a bankruptcy judge ruled, WSJ Pro Bankruptcy reported. The city “satisfies all the statutory requirements” as a municipality to restructure under chapter 9 bankruptcy, Judge Ashely Chan of the U.S. Bankruptcy Court in Philadelphia said in a written opinion on Tuesday. Chester’s filing in November marked the largest U.S. municipal bankruptcy since the 2017 filing by Puerto Rico. The city has struggled to keep up with its debt payments, including to Preston Hollow Community Capital LLC, which holds $19.2 million of the city’s 2017 municipal bonds. Preston Hollow objected to the city’s chapter 9 eligibility, arguing that the city failed to engage in the good-faith negotiations with creditors required by the bankruptcy code. On Tuesday Judge Chan disagreed, saying the record shows the city made efforts to negotiate with its major creditors, including its three unions and Preston Hollow, before filing for bankruptcy. Chester’s mayor and city council members also questioned the validity of the bankruptcy petition, asserting that the filing wasn’t voluntary because the city’s elected officials “did not authorize” it.

The biggest bondholder of the bankrupt Pennsylvania city of Chester is scheduled to appear in court on Monday to argue that the city’s chapter 9 bankruptcy petition is invalid and should be dismissed, WSJ Pro Bankruptcy reported. Preston Hollow Community Capital LLC, which holds municipal bonds issued by Chester in 2017 with the initial principal amount of $19.2 million, has argued that the city failed to engage in the good-faith negotiations required before a municipality can access the protections of chapter 9 bankruptcy. Once a thriving industrial and manufacturing hub near Philadelphia, Chester filed for bankruptcy in November after facing financial challenges in recent years. The unsecured bonds held by Preston Hollow make up a fraction of the city’s overall obligations, notably mounting pension obligations that include at least $127.2 million in back payments. Recognizing Chester’s financial distress, Preston Hollow approached the city in June 2022 to discuss its proposal for the city to pay down the bonds using a portion of the $30.4 million in federal assistance that it received under the COVID-19 stimulus package. The firm’s proposal would have reduced the city’s debt service obligations by more than $900,000 in the fiscal year 2023, according to court papers filed by Preston Hollow managing director Charles Visconsi. He said the city’s receiver, Michael Doweary, didn’t engage in negotiations and just said he would contact the firm “in the coming weeks.”