Date: May 24, 2010
To: Members, Senate Appropriations Committee
From: Jean Hurst, California State Association of Counties (CSAC)
Paul Smith, Regional Council of Rural Counties (RCRC)
Kyle Packham, California Special Districts Association (CSDA)
Jolena Voorhis, Urban Counties Caucus (UCC)
Amber Wiley, Association of California Healthcare Districts (ACHD)
Natasha Karl, League of California Cities (LCC)
RE: AB 155 (Mendoza) Municipal Bankruptcy
REQUEST FOR ‘NO’ VOTE (As Amended 5/20/2010)
Local governments urge your “NO” vote on AB 155 (Mendoza), which would require local
agencies contemplating bankruptcy to first obtain approval from the California Debt and
Investment Advisory Commission (CDIAC) before filing for bankruptcy.
The new amendments are meaningless to municipalities considering bankruptcy. They
provide municipalities the ability to override CDIAC’s denial to file Chapter 9. However, in reality
CDIAC still holds local governments hostage. The commission will always approve a
municipalities’ request to file a bankruptcy petition and then just impose onerous conditions.
Moreover, if a municipality overrides CDIAC’s decision, the municipality is required to reimburse
CIDIAC for its work, the effect of which strains the municipality further.
CDIAC would not bring anything to the bankruptcy process that isn’t already there. The
bankruptcy process is effective and neutral and has worked for more than 70 years.
Chapter 9 provides an automatic stay for a municipality to identify creditors, seek to
open negotiations with them, and pursue a resolution of the debt outside of the
bankruptcy process. It also provides protections for the municipality from creditors seeking to
collect on their debt or from terminating services they provide the municipality. Under AB 155,
CDIAC is given up to 45 days to approve or deny the municipality’s application to file Chapter 9.
The process alerts the world to the local government’s fiscal crisis and does not include relief
from having to pay creditors during that time and puts the municipality in a more vulnerable
position by making lenders wary.
AB 155 is a solution in search of a problem. The records show that it’s extremely rare for a
municipality to file Chapter 9. On top of the great fiscal distress municipalities are already
experiencing, the state is making it even worse by borrowing local revenues, taking local
redevelopment funds, deferring payments in addition to this proposed state micromanagement
of local fiscal affairs.
-MORE-
OPPOSITION TO AB 155
VOTE ‘NO’ TO STATE INVOLVMENT IN
LOCAL GOVERNMENT FISCAL AFFAIRS
Local Government Groups Opposed: Association of California Health Care Districts, Association of
California Water Agencies, California Contract Cities Association, California Society of Municipal
Finance Officers, California State Association of Counties, Regional Council of Rural Counties, Urban
Counties Caucus, California Special Districts Association, League of California Cities, League of
California Cities Inland Empire Division, League of California Cities Orange County Division, League
of California Cities San Diego Division, Marin County Council of Mayors and Councilmembers, South
Bay Cities Council of Governments and City Clerk’s Association of California.
Business & Taxpayer Groups Opposed: California Chamber of Commerce, California Public
Securities Association, Howard Jarvis Taxpayers Association, and Bay Area Council.
Individual Counties Opposed: Counties of Butte, Imperial, Nevada, Madera, Orange, Riverside, San
Bernardino, San Luis Obispo, and Yolo.
Individual Cities Opposed: Cities of Antioch, Adelanto, Agoura Hills, Albany, American Canyon,
Apple Valley, Atascadero, Arvin, Azusa, Bell Gardens, Bellflower, Belmont, Benicia, Berkeley,
Beverly Hills, Bishop, Blythe, Brea, Brisbane, Burbank, Burlingame, California City, Calistoga,
Camarillo, Carmel-by-the-Sea, Carson, Carlsbad, Chowchilla, Chula Vista, Clayton, Cloverdale, Clovis,
Coachella, Coalinga, Commerce, Concord, Costa Mesa, Cotati, Covina, Cypress, Daly City, Danville,
Diamond Bar, Dixon, El Cajon, El Segundo, Encinitas, Exeter, Fairfield, Folsom, Fontana, Foster City,
Fountain Valley, Fowler, Fremont, Fullerton, Glendora, Gonzales, Greenfield, Guadalupe, Hanford,
Healdsburg, Hermosa Beach, Highland, Hillsborough, Hollister, Hughson, Huntington Park, Huntington
Beach, Huron, Imperial Beach, Irvine, Irwindale, Kingsburg, La Palma, La Puente, La Verne, Laguna
Hills, Laguna Beach, Lake Forest, Lafayette, Lakewood, Lathrop, Lawndale, Lemoore, Lindsay,
Livermore, Lodi, Long Beach, Los Banos, Madera, Mammoth Lakes, Manhattan Beach, Manteca,
Marysville, Merced, Mendocino, Mendota, Mill Valley, Modesto, Monrovia, Monterey, Moreno Valley,
Murrieta, Napa, Newport Beach, Norco, Norwalk, Novato, Oakdale, Oakland, Ontario, Oroville,
Palmdale, Palo Alto, Paradise, Pasadena, Patterson, Pinole, Placentia, Pleasanton, Pomona, Poway,
Rancho Cordova, Rancho Cucamonga, Red Bluff, Redwood City, Reedley, Ridgecrest, Rialto, Rio
Vista, Riverbank, Rohnert Park, Rolling Hills Estates, Rosemead, Sacramento, San Diego, San Jose,
San Leandro, Salinas, Sanger, San Luis Obispo, San Marcos, San Mateo, San Pablo, San Rafael, Santa
Cruz, Santa Maria, Santa Rosa, Sausalito, Seaside, Sebastopol, Selma, Shafter, Signal Hill, South San
Francisco, Stockton, Suisun City, Sunnyvale, Tehachapi, Tiburon, Torrance, Tracy, Tulare, Tustin,
Union City, Vacaville, Vallejo, Victorville, Villa Park, Visalia, Vista, Walnut Creek, Wasco, West
Covina, West Hollywood, Westminster, Windsor, Woodlake, Woodland, Yorba Linda, Yountville, and
Yucaipa.
Individual Special Districts Opposed: Ambrose Recreation and Park District, Bell Canyon
Community Services District, El Dorado Hills Community Services District, Goleta Sanitary District,
Lincoln Rural County Fire Protection District, Mountain House Community Services District, Squaw
Valley Public Service District, Stallion Springs Community Services District, and Vista Irrigation
District.