April 20, 2012
AB 1692 Seeks to Unravel Provisions of Last Year’s Municipal Bankruptcy Bill
This week the League was surprised to learn that AB 1692 (Wieckowski) was amended in an effort to unravel key features of AB 506 (Wieckowski), last year’s carefully negotiated municipal bankruptcy bill. AB 1692 would remove provisions of AB 506 related to the mediation process including giving the “neutral evaluator” independent decision-making authority and allowing other parties to create delays by allowing the process to continue without the concurrence of the affected public entity.
Last year the League vehemently opposed to similar provisions in AB 506 because they created obstacles to municipal bankruptcy and resulted in a process stacked against local agencies. The League is opposed to AB 1692 for the same reasons.
In September 2011, after careful negotiations, which included Sen. Lois Wolk (D-Davis) and Gov. Jerry Brown, the League agreed to a compromise based on provisions that allowed for pre-bankruptcy facilitation by a mediator without state or other political intrusion and unfettered local access to federal bankruptcy protection if an emergency fiscal situation exists. For background information on the municipal bankruptcy bill, please see “Opposition to Municipal Bankruptcy Bill Removed After Author Takes Amendments” in the Sept. 7, 2011 issue of CA Cities Advocate.
The act of attempting to undo these provisions only four months after the law took effect speaks for itself. Furthermore, the cities of Stockton and Mammoth Lakes are currently engaging in a good faith effort, using the provisions of AB 506, to address issues with their creditors and avoid bankruptcy. This measure attempts to tamper with that process when the parties have not even had a chance to determine if they can reach agreements.
The League’s opposition letter is available on the League’s website by typing “AB 1692” into the search box.
City officials are strongly encouraged to:
1. Send opposition letters immediately; and