NEW YORK TIMES: ….Richard L. Sigal, a lawyer who has played roles in many fiscal crises, including New York City’s in the 1970s, was wary of bankruptcy, arguing that the Chapter 9 law does not bestow the power to tax, cut spending or borrow — the tools that struggling governments need. “I have yet to see a situation where bankruptcy is the right option for any municipality,” he said.
But Robert G. Flanders Jr., the state-appointed receiver for Central Falls, R.I., said his city’s declaration of bankruptcy had proved invaluable in helping it cut costs. Before the city declared bankruptcy, he said, he had found it impossible to wring meaningful concessions out of the city’s unions and retirees — who were being asked to give up roughly half of the pensions they had earned as the city ran out of cash.
“The municipality is on bended knee asking the retirees and unions to come to the table and give up their contract rights,” he recalled. “All of that leverage shifts once you have the gumption to pull the Chapter 9 trigger. And guess what? That produces agreements quicker and more effectively than otherwise.” … (more)
