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Experts say municipal bankruptcy is losing serious stigma

Published: Monday, July 6 2015 1:38 a.m. MDT

As three California cities file for Chapter 9 bankruptcy, experts are speculating that insolvency for municipalities may be losing it’s stigma. (taberandrew via Flickr) As three California cities file for Chapter 9 bankruptcy, experts are speculating that insolvency for municipalities may be losing it’s stigma. (taberandrew via Flickr)

As three California cities file for Chapter 9 bankruptcy, experts are speculating that insolvency for municipalities may be losing its stigma, according to Bloomberg.

“Do I expect more? Yeah, but I don’t expect a tidal wave,” Dick Larkin, director of credit analysis for Herbert J. Sims & Co. in Iselin, N.J., told Bloomberg. “I am starting to wonder whether or not the stigma of bankruptcy in California is going to be taken more lightly now.”

Some experts have witnessed municipal bankruptcy firsthand and expect more to come after California’s most recent insolvencies.

“The dominoes are starting to fall,” John Moorlach, who became Orange County treasurer after the county entered court protection in 1994, told Bloomberg. “You’re going to get something every week, every month.”

San Bernardino’s city council voted to join Stockton and Mammoth Lakes in filing for Chapter 9 bankruptcy protection. The city of 209,000 has more than $220 million of debt and has opted to bypass mediation with creditors due to its fiscal emergency.

“We don’t believe we have enough cash flow to get through the next 60 days,” Jame Penman, San Bernardino’s city attorney told Bloomberg.

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