Distressed Cities Feel Hands Are Tied

PROVIDENCE, R.I. — While the need for struggling cities and towns to act now was a common refrain at The Bond Buyer's Symposium on Distressed Municipalities, roadblocks often stand in the way.

"The biggest takeaway from this conference I see is that the fates of municipalities are being tied so much to state legislation," said Ballard Spahr LLP partner and conference co-chairman William Rhodes as the two-day conference at the Omni Providence hotel concluded Tuesday.

"Local governments do not have a lot of control, while a number of expenses have gone up unabated. You heard it from the Syracuse mayor [Stephanie Miner] and the officials in Rhode Island. They're saying, 'Give us the tools to manage our collective bargaining agreements.'"

The morning talks included financial techniques that can help in fiscal recovery, and investing in distressed credits.

"I have no idea what people mean by kicking the can down the road. I assume the can's at the end of the journey. We want to crush that can,'" said Michael Solomon, a managing director at Ramirez & Co., who discussed how sensible debt management can help with financial recovery.

Kimberly Betterton, also a Ballard Spahr partner, talked about pairing long-term capital financings with tax-exempt or taxable debt restructurings to achieve short-term financing relief.

"Working capital financing can be useful. This tool and scoop-and-toss, even though they're bad words, can be used to get people where they need to be," said Betterton. "They can be used to buy time, as long as it's not to buy time in a way that they have the same problems two years from now."

"Long-term working capital can be done, and many have put it to creative uses," said Roger Bagley, a partner with Hawkins Delafield & Wood LLP.

Geordie Thompson, a vice president at Moody's Investors Service, said the use of debt for structural balance varies by issue.

"If change is being made, we have to unearth why it's being used and other effects," said Thompson, whose analysts assign local government ratings in New England, New York and Pennsylvania. "It's not good or bad. We have to look at whether it's a delaying tactic or whether it's a real bridge to get to structural balance."

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