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Nebraska’s Gage County Hires Bankruptcy Attorneys

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Gage County, Neb., has hired a law firm that offers bankruptcy services as the county struggles to deal with a $28.1 million judgment awarded to six people who were wrongfully convicted of murder, the Associated Press reported on Friday. County officials signed contracts Wednesday with Lincoln-based Woods & Aitken and two other law firms providing legal services. Bankruptcy has been among the scenarios county leaders have been forced to consider as they appeal the judgment won in July by the so-called Beatrice Six inmates, who spent a combined 77 years in prison in the 1985 death of 68-year-old Helen Wilson before DNA testing cleared them in 2008. The county’s current and former insurers have denied coverage, and Nebraska Attorney General Doug Peterson said last week that the state couldn’t lend the county money because the damages were awarded in a federal lawsuit. The county has appealed the judgment, arguing that there wasn’t enough evidence to find against the county and law enforcement officials and saying the award was too high. A federal judge rejected the appeal in September. The county has since appealed to the Eighth U.S. Circuit Court of Appeals.

City of Hartford Is Facing Tough Decisions Amid Financial Crisis

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Some outspoken critics of the city of Hartford, Conn., are pushing for bankruptcy instead of a state bailout or paying off Hartford’s staggering debts with help from its suburban neighbors, WFSB reported yesterday. The shortfall in 2017 is projected to top $30 million, and just this week Hartford Mayor Luke Bronin refused to rule out the possibility of bankruptcy.
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New Jersey Takes Over Debt-Ridden Atlantic City Government

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Gov. Chris Christie’s administration has seized power in Atlantic City, N.J., taking control of the assets and major decision-making in the struggling seaside gambling resort that is half a billion dollars in debt, the Associated Press reported today. The New Jersey Local Finance Board voted to take over the city’s main governmental functions after the state government rejected a proposed five-year financial turnaround plan. The state can now sell assets, as well as reverse city council decisions, break union contracts, and hire or fire workers, but declined to give itself the power to file for bankruptcy on behalf of the city. The takeover occurred a week after the state Community Affairs Department rejected a proposed financial turnaround plan that would have seen the city lay off 100 workers, cut spending and sell its largest tract of vacant land to its water utility, keeping both in private hands. The state said that plan did not provide sufficient financial stability for a city already heavily dependent on state aid.
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Puerto Rico Bonds Rally After Rossello Becomes the Next Governor

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Some Puerto Rico general obligations rallied to the highest price in nearly 17 months after the island elected New Progressive Party candidate Ricardo Rossello for governor, ushering in a change of power after the island defaulted on a growing share of its debt, Bloomberg reported yesterday. General obligations with a 5 percent coupon and maturing in 2041 traded Wednesday for an average of 65 cents on the dollar, the most since June 23, 2015, and up almost 2 cents from a day before. Rossello favors paying bondholders interest if they agree to wait longer for principal payments. That’s a break with Gov. Alejandro García Padilla’s administration, which has defaulted on $1.8 billion of debt-service costs since August 2015, including on general obligations, which the island’s constitution says must be paid before other expenses. Rossello’s win empowers the party that’s pushing for U.S. statehood just as Puerto Rico struggles with a fiscal crisis so severe it prompted the federal government to step in. The new administration will have its power curtailed by a seven-member federal board with authority to approve the budget and any plan to restructure the island’s debt. Puerto Rico’s most actively-traded general obligation also gained in value Wednesday. General obligations with an 8 percent coupon and maturing in 2035 traded at an average price Wednesday of 71.5 cents on the dollar, the highest since March 22. Rossello faces considerable challenges. Puerto Rico’s population has declined in the past decade and the next administration must also find ways to turnaround an economy that’s failed to grow since 2007.

How San Bernardino Voters Empowered City Hall with Measure L

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The national election may have been a rejection of the establishment, but voters in San Bernardino, Calif., overwhelmingly showed their trust of city officials by adopting a new city charter that empowers those officials, the San Bernardino County Sun reported yesterday. The argument against Measure L, which replaces the city’s governing document, was similar to arguments that prevailed against previous charter reform efforts: that it was a power grab, that citizens would be giving up their vote, that it empowered corruption. Such arguments defeated charter amendment efforts in 2014, in 2010 and earlier. This year, more than six out of every 10 voters endorsed city officials’ arguments that the so-called checks and balances in the charter created left it unclear who was in charge, holding back progress. The new charter will go into effect once the City Council approves an ordinance certifying its passage. That will likely be at the next City Council meeting on Nov. 21. The new charter shifts the city from a hybrid system of government to a council-manager form. Used by 58 percent of cities with a population over 100,000, this means city council members have less day-to-day control and the city manager has more.
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New Jersey Rejects Atlantic City Recovery Plan, Opens Door to Takeover

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New Jersey yesterday rejected Atlantic City's recovery plan, saying that it was unlikely to achieve financial stability, setting the stage for a possible state takeover of the cash-strapped gambling hub, Reuters reported. The plan, which would cut costs, borrow money and raise $110 million through a land sale, did not go far enough, New Jersey Department of Community Affairs Commissioner Charles Richman said in his decision. The blueprint failed to meet several necessary requirements, and city leadership "has had ample time to improve the city's financial condition yet has avoided doing so in any meaningful way," Richman wrote. The city's property tax base plummeted over the last several years as increased gambling competition in neighboring states cut into the city's casino industry. In a joint statement with City Council President Marty Small, Mayor Don Guardian called on the state to reconsider its decision. Earlier yesterday, Atlantic City met its $9.4 million debt service payment but still owes another $7.1 million through the end of the year.

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Cost Cuts, But No Tax Hikes in Atlantic City’s 5-Year Recovery Plan

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Atlantic City, N.J.'s cash-strapped casino hub, will slash at least 100 jobs, or about 10 percent of its staff, but does not plan to raise taxes in a five-year fiscal recovery plan aimed at avoiding a state takeover, according to a presentation by city advisers yesterday. The gambling resort has lost more than two thirds of its property tax base since 2010 because of competition from casinos in neighboring states, which has led five of the city's 12 casinos to close since 2014, Reuters reported. The city also plans to sell a defunct airstrip to its water authority for $110 million to fill a budget hole and meet terms of a $73 million emergency loan issued by the state earlier this year. Under the recovery plan, Atlantic City will borrow to help pay off big tax appeal settlements that it owes to the MGM Resorts International-operated Borgata and other casinos, lawyers said at the city council hearing. Mayor Don Guardian said that the plan will be presented to state officials in Trenton today after the city council approved it yesterday. From there, the state has five days to accept the plan. If it does not pass muster, the state could take over city operations, a move that New Jersey Gov. Chris Christie has pushed for in the past.

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Detroit’s Home County Exits State Oversight as Finances Improve

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Wayne County, Mich., the home of once-bankrupt Detroit, won release from its consent agreement with the state as its finances improved after 14 months of oversight, Bloomberg News reported yesterday. The county received formal notification from the state approving its request to be released from the pact, the county said yesterday. Michigan Treasurer Nick Khouri found the county met terms of the agreement by fixing its deficit and restoring fiscal stability. In June 2015, County Executive Warren Evans asked the state to declare a financial emergency to help Michigan’s largest county fix its budget crisis. He requested the consent pact, an initial step toward state oversight. That agreement, which became effective in August 2015, allowed the county to avoid bankruptcy. At the time, the county of 1.8 million residents faced a $52 million annual deficit because of rising costs and a declining population. Since then, county officials moved to reduce retiree health care bills, cut labor costs and turned once-chronic deficits into surpluses.