Law and legal issues

A bill that would change California's municipal bankruptcy law again appears to have stalled without support from the Democratic majority leadership in the state Senate.

Bond insurer National Public Finance Guarantee Corp. has challenged Stockton, Calif.'s petition for a bankruptcy.

Michigan officials on Wednesday took steps to ensure that emergency financial managers remain in place at three school districts and four cities after the election board formally approved putting a measure asking voters to repeal the management law on the November ballot.

Former Alabama Gov. Don Siegelman was re-sentenced last week to 78 months in prison for bribery, conspiracy, fraud and obstruction of justice. Siegleman was convicted of selling a seat on a state health panel in return for donations to a failed state lottery initiative.

The judge in Stockton's bankruptcy case has denied an injunction that would have kept the city from cutting retiree medical benefits during the Chapter 9 process.

Jefferson County, Ala.'s bankruptcy judge Wednesday will hear arguments about setting a deadline for the county to propose a plan of adjustment, and will consider a Birmingham group's claim for $1.63 billion.

A repeal of Michigan's controversial emergency management law would likely further challenge already fiscally troubled municipalities, Fitch Ratings said last week.

Supporters of a plan to overturn Glendale's new 0.7% sales tax have appealed a court ruling that would keep the referendum off the November ballot.

Pennsylvania state Sen. Jeffrey Piccola, who sponsored legislation that led to the state takeover of distressed capital city Harrisburg, faces 14 charges of professional misconduct as a private attorney.

Michigan Treasurer Andy Dillon said Friday that legislators should consider crafting a new law for troubled municipalities after a state Supreme Court ruling allowed an effort to overturn the existing law on the November ballot.

State governments have had a major role in how municipalities deal with fiscal distress, says HJ Sims director of credit analysis Richard Larkin.

While the mayor and City Council finally came to terms in Scranton, Pa., over a financial recovery plan, the matter remains at a standstill because the city's state-appointed coordinator doesn't like it.

Stockton, Calif., is proposing to temporarily cut personnel costs by 6.6% while permanently cutting payments on the Assured-insured pension obligation bonds by 83%, the company said.

With the threat of a lawsuit rising and a Monday deadline looming, the Dallas suburb of Irving, Tex., on Thursday sought a way to resolve a bond financing dilemma for a $252 million entertainment center. The triple-A-rated city expected two years ago to be able to issue up to $170 million of debt to finance the project. Since then, the city council majority in favor of the project, including the mayor, has been turned out of office. The city recently received confirmation that revenue bonds issued for the project would be rated below investment grade.

The recent bankruptcy filings of Stockton and San Bernardino share a common element — both troubled California cities target pension obligations bondholders for sizable haircuts.

Two former Lynwood, Calif., council members have been convicted of corruption for alleged illegal use of public funds.

San Bernardino, Calif. filed Wednesday for protection under Chapter 9 of the U.S. bankruptcy code.

A House Financial Services Committee panel approved a bill Wednesday that would exempt municipal advisors from having a federal fiduciary duty to place muni issuers' interests first, but lawmakers said the bill's final version will leave the fiduciary requirement in place.

A New York court has ruled that bond insurer ACA must pay claims on defaulted bonds that it insured.

With its ability to issue debt limited by discovery of a phony audit used in an earlier bond official statement, the New Mexico Finance Authority is proceeding with an investigation to clear up the debacle.