Monthly Archives: August 2017

In theprevious part of this series on Overcoming Economic Downturns and Fiscal Distress, MuniNet Guides James Spiotto took us through the Gathering Storm of financial and economic challenges in state and local governments. Particular attention was paid to the casesof the State of Illinois and its municipalitiesfrom 2000 through today. In this next part in the series, focus is kept on the State of Illinois and its municipal governments,and the policies and institutions available to provide relief and solutions.Local Government Protection Authorities are explored in detail.

by James Spiotto

States that Provide Oversight and Assistance. At least twenty-eight states, the District of Columbia and Puerto Rico have implemented some form of municipal debt supervision or restructuring mechanism to aid municipalities.These range from Debt Advisory Commissions (e.g. California) and Technical Assistance Programs (Florida) which provide guidance for and keep records of issuance of municipal debt to the layered approach of Rhode Island and Michigan of oversight commission and fiscal manager or receiver.Examples of state oversight, supervision and assistance for fiscal emergencies of local government.

Evolution of Past Mechanisms that Worked. Under consideration by some states is the use of a local government protection authority utilizing some of the best aspects from the mediation process of the neutral evaluator and the oversight and supervision of financial control boards, emergency managers, and receivers.

State-Created Quasi Judicial Function. Under this municipal debt resolution mechanism, the state would establish an entity that would have a quasi-judicial function and power similar to a commission or special master appointed by a state supreme court or other objective nonpolitical process. The members of the authority would be independent, experienced experts in governmental operation or finance as well as in mediation and debt resolution techniques, including bankruptcy.

Initiation of Proceedings. The authority would start with those municipalities that petition for help or those municipalities that have triggered certain established criteria where the jurisdiction of the authority may be mandated by state law.

First Phase Mediation and Consensual Agreement. The first phase is mediation and consensual agreement by the municipality and the affected creditor constituencies similar to the neutral evaluator process.

However, participation by the authority may be voluntary by petition of the municipality or other affected constituencies asserting that a financial emergency exists or, under the most direct circumstance could be required, and negotiation and discussion of positions are strictly confidential.The state law establishing the authority may have an exception to its open meetings law and its freedom of information law to allow for open discussion of any sensitive and confidential topics.If additional tax revenues or loans or grants from the state are needed, recommendations to the state by the authority may be made. The authority may be empowered to likewise call for a referendum on a local basis for increased taxes or other actions.Specified time periods for resolution will be set forth and, if the voluntary process is not successful, the second phase may be requested or may be mandatory if the authority so requires.

Second Phase Determination of a Recovery Plan. In the second phase, the authority and its designated members turn into a quasi-judicial panel, and the municipality is required to set forth the actions proposed to be taken to address its specific financial problem (recovery plan) for authority approval.

Creditors, workers, and taxpayers will have the ability to comment and to attempt, through negotiation, to modify the recovery plan within a set period of time.Then, the recovery plan is presented to the panel members of the authority for determination of the plans feasibility and whether it is reasonably fair to creditors interests in relation to the requirement that, under all circumstances, essential governmental services, at least at an established necessary level, must be funded and maintained for the reasonable future.One of the triggers for the authoritys jurisdiction is the petition by the municipality, its workers, or taxpayers that a governmental function emergency exists. The municipality or petition must state that essential services as to the health, safety, and welfare of its residents are being threatened and that the forced reduction in services, given the municipalitys financial condition and its limited revenues, impairs the health, safety, and general welfare of its residents.

Power of the LGPA. The authority, after hearing all sides (municipality, workers, taxpayers, affected creditors), will determine:

Determination Process of the Authority.

To the degree state has effective and applicable mechanism to help prevent default or provide funds or assistance to prevent default or methods of solving financial problems of municipal issuers this is information important to the investor and should be considered to be disclosed to the investor. Such information may improve the perception of the issuers credibility in the market.

For a summary of what the various states have provided to assist their municipalities in financial distress, see the following chart summarizing a 50-state survey which indicates whether the municipality (i) can file Chapter 9, (ii) has debt limits and allows refunding bonds, (iii) has access to municipal restructuring mechanisms, (iv) allows for receivers, examiners, financial control boards, coordinators, etc. (v) has default resolution remedies, permits creditors to obtain through court proceeding an accounting, foreclosure, injunction, a writ of mandamus to levy taxes or other remedies, (vi) permits special revenues bonds, and (vii) authorized statutory liens. The chart provides an overview of the 50 state survey from the book Municipalities in Distress?:How States and Investors Deal with Local Government Financial Emergencies (2nd edition, 2016). For more information, including information on Municipalities in Distress, please visitChapman & Cutlers website.

* The language of the statute appears to strongly support a determination that it is a statutory lien

** While the language of the statute may appear to create a statutory lien further clarification would be helpful to reaffirm the intent to create a statutory lien

*** While the language of the statute may appear to create a statutory lien it is insufficient and additional language is required to clarify the intent and to create a statutory lien. The language could be read as just providing for perfection of a pledge or lien without the intent and effect to create a statutory lien

**** These numbers include both the District of Columbia and Puerto Rico where applicable and totals may differ from other materials that only review 50 states.

James E. Spiotto, Co-Publisher James E. Spiotto. All rights reserved. The views expressed herein are solely those of the author and do not reflect the position, opinion or views of Chapman and Cutler LLP or Chapman Strategic Advisors LLC.

Up nextSolving Financial Distress with Economic Development and Stimulus from Needed Infrastructure Improvements, Reinvestment in States and Municipalities, and the need to Address Legacy Costs of Unfunded PublicPensions and Deferral of Updates to Infrastructure.

Click here to read the introduction to this series,How State and Local Governments Can Overcome Economic Downturns and Fiscal Distress

Click here to read Part I:The Gathering Storm

Read more:

Overcoming Economic Downturns and Fiscal Distress Part II: Alternatives Available to the State of Illinois and its ... - MuniNet Guide

A group seekingCalexit believes secession is possible as it pushes for a new ballot initiative and a plan to unite Californians to take back those tax dollars from the U.S.

The California Freedom Coalition is attempting to raise funds for the initiative, and its members are aiming to collect the required 585,407 signatures from Californians to move ahead with the planat the ballot box.

We feel like this current initiative is more feasible and will hold up more to scrutiny and legal challenges, a member of the group, Steve Gonzales, told The Sacramento Bee of the push for Calexit.

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A previous attempt at California nationhood was dumped in April after failing to find enough support, but the CFC believes things could be different with a new ballot initiative.

The initiative would seek to repeal a provision in the California Constitution stating California is an inseparable part of the United States, it says, adding that there would be an agreement to establish California as a fully independent country.

But secession would come at a cost, includingat least $1.25 million in state funding for an independent commission to research the ballot initiative, the Office of the Attorney General of Californiasaid,as well as unknown, potentially major, fiscal effects if California voters approved changes to the states relationship with the United States at a future election after the approval of this measure.

However, the group and other supporters of Calexit believe such financial risk would be worth it, particularly given that Californias political leanings are so at odds with the current administration and that California sends more tax dollars to the federal government than any other state.

We feel that California has been neglected and left out of the political process for many, many decades, Gonzales told the Bee.

With current politics the way they are, clearly theres a recognition that many in the United States have disdain for Californians. They call us out of control. So this is a time for us to take back those tax dollars and really unleash the potential California has, he added.

Following Trumps election victory, it appeared that support for Calexit was increasing, with a January poll from Reuters showing 32 percentof Californians would back a break from the U.S.

However, secession is ultimately unlikely, given that the majority of Americans do not support the proposal and that a Calexit would also face major legal hurdles regardless of public opinion.

See more here:

Calexit Group Says It's Time for Californians to 'Take Back Those Tax Dollars' From the US - Newsweek

Robert Kennedy Jr. teamkennedy2017.org

With just two weeks to go before the August 15 primary, some Democrats worry Kennedy could win the nomination on a fluke, thanks to his name, recalling Alvin Greenes

"Theres suspicion that hes here to bust up the vote and help secure the race for the Republicans," said Beckerle.

The poll showed Kennedy with 49 percent of the vote, outpacing his closest competitor nearly two-to-one in a race that has been entirely overshadowed by

"Really all this shows is youve got a guy with a famous name," said Doug Jones, Kennedy's closest competitor.

Jones is a former U.S. attorney appointed by Bill Clinton who has been involved in Alabama politics since he was president of the Young Democrats chapter in law school.

Alabama papers have dubbed Kennedy a "

But Kennedy his full name is Robert Kennedy Jr. in case you were wondering if his middle initial were "F" would like to clear a few things up.

First of all, hes named after his father, Robert Kennedy Sr., who was born before the other Kennedy family rose to prominence. Second, Alabama Democrats dont know him because he left his Mobile-area home at 18 to join the Navy and then worked for big multinational companies. Third, the Naval Academy graduate with an MBA from Duke University may be a political novice, but hes no dummy.

And, no, hes not a Republican plant. Yes, hes a gun-owning fiscal conservative who emphasizes "faith," "family," and "freedom" as the three key tenets of his campaign. But as an African-American whose parents were raised in the Jim Crow South, he wants an activist federal government to help even the playing field.

"I understand that my name will give me some points," he said. "But to suggest that my name in that particular poll gave me 49 points is disrespectful to the voters."

Anthony Terrell contributed reporting.

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Robert Kennedy Jr. Is Leading in Polls. No, Not That One - NBCNews.com

Republicans have a huge choice to make, an unusually binding decision on the next steps for their legislative agenda. It will determine the campaign promises they will be able to keep, and more importantly, the lived experience of millions of Americans. And it all comes down to one simple bill.

That bill is the Congressional budget resolution for 2018. It doesnt make specific policy, just sets the course for the federal budget for the next year. But because of the unusual procedures Republicans have used to cut Democrats out of governing and avoid the Senate filibuster, they can either pass the budget resolution, and give up on repealing the Affordable Care Act until at least 2019, or put this bill aside, and commit to a far more moderate tax cut policy than currently envisioned.

Related: How Trump Could Still Win the Health Care Fight

Republicans used the 2017 budget resolution to set instructions for a health care overhaul through reconciliation, which requires only a majority vote in each chamber of Congress. The idea was to use the 2017 reconciliation bill for health care, and the 2018 bill for taxes (and potentially infrastructure investment).

But last weeks failure of the health care reconciliation bill in the Senate creates a dilemma. If theres no 2018 budget resolution, Republicans can return to the health care reconciliation bill at any time before the end of next year. Circumstances could change, votes could flip and, not to be ghoulish, but John McCain could no longer be a U.S. senator. Republicans can wait out that process. But if they pass a 2018 budget resolution with reconciliation instructions, it would nullify the 2017 resolution. That would mean the health care bill is dead.

Now, the GOP could simply write health care instructions into the 2018 resolution, keeping the process alive. But they really want to move to cutting taxes, the one thing practically every elected Republican agrees on. And conservatives want the option of passing those tax cuts with a majority vote, without requiring Democratic input in the Senate.

Related: The Health Care Fight Isn't Over, Despite Democratic Cheering

The party leadership wants to move on from health cares wreckage and show they can get things done efficiently. And the big money behind the scenes is pouring millions of dollars into advertising and public events supporting tax cuts, air cover that didnt exist on health care.

But theres a huge split among the Republican faithful. While polling shows the general public wants Congress to move on from health care, conservatives dont. They are threatening retribution in next years primaries for members of Congress who fail to finish the job on health care. And Republicans generally fear their conservative base tossing them out as much as, if not more than, losing gerrymandered, safe seats to Democrats.

The Trump administration has sent mixed messages. Trump has tweeted that senators shouldnt be total quitters on the health care bill; hes even threatened to revoke subsidies for members of Congress and their staffs if theres no action. Over the weekend, White House budget director Mick Mulvaney restated Trumps position: The Senate shouldnt vote on anything else until it moves on health care. And Sen. Lindsey Graham has entered discussions with the White House over a new bill, which would simply deliver all health care funding to the states and let them figure it out. Graham believes it can garner 50 votes in the Senate and advance the process.

Related: What Do Democrats Stand For? The Party Finally Has the Right Answer

At the same time, Trump has events planned this week promoting a tax overhaul, and a proposed schedule of speeches across the Rust Belt in August. And the business community, which has only tepidly sold the Trump agenda, stands ready to spend massive resources to get their tax cuts.

So that would appear to be the choice: health care or taxes. But theres a third option: If Republicans could strike a tax deal with broad bipartisan support, they wouldnt need a budget resolution to enable a 50-vote threshold in the Senate. They could build a big-tent tax policy while keeping the 2017 reconciliation bill on ice and waiting for the winds to shift on health care.

What would a bipartisan tax deal look like? There are plenty of pieces floating around that Congressional Democrats have supported in the past, even if I dont. Minority Leader Chuck Schumer co-authored a repatriation tax proposal with Republican Rob Portman in 2015, which would tax one-time revenues from a small tax on overseas profits and put the money toward infrastructure investment. In that deal, Republicans would get a permanent tax rate cut on overseas earnings. A middle-class tax cut would probably sway some Democrats, and if Steve Bannons desire for a 44 percent tax bracket for multi-millionaires is legitimate, that would attract liberals, too.

Related: Democrats Have One Big Idea in Their Better Deal That Should Worry the GOP

Billionaires funding ads on tax reform are not interested in higher tax rates on the rich, and ideologues in the House Freedom Caucus balk at increases in any part of the tax code. But a bipartisan bill might be the only path to deficit-neutral tax reform, which House GOP leaders claim to want. Last week, Republicans issued a joint statement on tax reform in which they killed the main revenue-raiser in their proposal, a so-called border adjustment tax that would have favored exports over imports. Without anywhere else to turn, raising money by taxing the super-wealthy could serve as the price for big business tax cuts, as Jeff Spross argued on Monday.

This kind of compromise would keep health care in the mix. Plus, the joint statement on taxes was surprisingly weak on details, revealing how ideological constraints could paralyze the effort and further expose the GOP as unable to govern. Republicans might need a bipartisan deal to succeed at getting anything passed.

This kind of deal would cut against the totality of Republican actions since the Trump inauguration: scornful of compromise, neglectful of Democratic input, determined to go it alone. There are bipartisan solutions staring Republicans in the face on several issues and they havent taken the plunge, whether out of stubbornness or fear of reprisal from their base.

That has put them in this quandary. If they want a Republican-only tax bill, theyll have to give up on seven years of dreams to repeal Obamacare. If they want to keep repeal on the back burner, theyll have to work with Democrats on taxes. Because Republicans dont want to do either of these things, they may end up with nothing.

P.S. This is my last column for The Fiscal Times before I head off to other opportunities. I want to thank everyone at the operation for great encouragement and support the past three years.

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The Entire Republican Agenda Now Hinges on This One Decision - The Fiscal Times