Prichard, Ala., to File Again for Chapter 9

BRADENTON, Fla. — Burdened by millions in unfunded pension obligations, Prichard, Ala., on Tuesday filed notice in federal court of its intention to enter Chapter 9 municipal bankruptcy — for a second time.

Since the city first filed for bankruptcy in 1999, “Prichard’s economic fortunes have continued to decline and it finds itself unable to adequately address all of its outstanding financial obligations,” according to a motion the city filed Wednesday to establish procedures for notifying the public about the filing in the U.S. Bankruptcy Court for the Southern District of Alabama.

“In particular, Prichard has a substantial under-funded pension obligation,” said the motion, which did not state the amount of the unfunded obligation.

The city reported to the federal court that its net revenues in fiscal 2009 were $10.1 million, but its net operating expenses were $10.7 million.

“The debtor is subject to a number of extraordinary financial claims against it, as well as the above noted deficiency in its pension funds,” the city reiterated without specifying the amount of the deficiency.

In court documents, the city said that it has no outstanding bond debt.

Prichard is a 25.4-square-mile city in southern Alabama’s Mobile County with a population of approximately 25,000 people.

This week’s bankruptcy filing came after 48 city pensioners in August filed a lawsuit against the city demanding $16.5 million, in addition to attorneys’ fees. Their suit, according to published reports, claimed that the city failed to make adequate contributions to its pension fund since first exiting from bankruptcy in 2002.

The city said in August that it had approximately 160 pensioners and expenses were running at about $150,000 a month.

City Council member Troy Ephriam, who also is the pension board chairman, told the Press-Register newspaper that $43,872 remained in the pension account in August.

While the city has not filed a brief outlining its bankruptcy case, it has filed motions asking the court for permission to negotiate with various utilities seeking payment and it has filed a list of its top 20 unsecured creditors. The top creditors are health and insurance providers, and various utilities.

“After careful review of all of our options, bankruptcy protection seems to be the only solution left at this time,” Mayor Ron Davis said in a statement. “Over the past 50 years, the pension plan was amended by the Legislature more than 15 times and always the economic burden on the city was increased.”

“This has been a long-term problem that was unfortunately inherited by this administration,” Davis said. “After several lawsuits filed by pensioners, it has forced us to come to this decision, one that will protect the city and its residents.”

Davis has been mayor since 2004.

The city did not pay pensioners this month and is not expected to make payments next month.

The most recent financial statement on the city’s Web site showed that in fiscal 2005, Prichard’s unfunded pension liability was $16.62 million. In 2005, the city said that it was considering issuing taxable bonds to fund the pension plan.

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