Analysis: Stockton, California new paradigm for struggling cities

By Hilary Russ | Reuters
NEW YORK (Reuters) - Stockton, California, the largest city in the United States to ever file for bankruptcy, could create a new template for struggling cities and potentially lift the stigma that scars municipalities if they seek court protection from creditors.

If Stockton, which filed for Chapter 9 municipal bankruptcy on June 28, can reach consensus with its creditors and craft a plan to exit bankruptcy quickly others may follow suit, legal experts said.

"Successful cases breed more filings," said Andrew Glenn, a bankruptcy partner in New York at Kasowitz
Benson Torres & Friedman. "Municipalities watch these cases closely around the country, and once the template is set up, if other towns have these problems, they're going to follow the template."

Other cities and counties have gone bankrupt because of a bad investment or ill-conceived public works project, like the sewer system that sank Jefferson County, Alabama, into $3.14 billion of debt.

But Stockton may be a new breed of failing city, swamped by routine costs, pension payments, a payroll for city employees, a years-long economic slide and depressed housing tax receipts - the same issues that currently face many other cities still struggling to recover from the cavernous U.S. recession.

"Stockton is a precursor of something very different" from Jefferson County, Glenn said. "That's what makes it sort of a game-changing type of a case."

It will be the first case to test California's mandated mediation process. State lawmakers changed the rules after the city of Vallejo went bankrupt in 2008 and then slogged through a three-year bankruptcy battle that racked up at least $10 million in attorneys' fees.

Now, unless they declare a fiscal emergency, California municipalities must participate in mediation before they are allowed to file for bankruptcy.

Each state has different requirements for cities and towns that want to file for Chapter 9 bankruptcy.
Some use budget commissions, receivers and other measures to try to help resuscitate cities before allowing them to go bankrupt as a last resort. Nearly half of U.S. states don't allow municipal bankruptcies at all.

James Spiotto, a partner at Chapman and Cutler in Chicago, said California is the only state that requires mediation prior to a Chapter 9 filing. A similar proposal failed to pass the Illinois legislature this session, he said.

He also noted in a recent national survey of Chapter 9 state provisions that California labor unions supported the mediation law as "a reaction to the difficulties they experienced in the city of Vallejo Chapter 9 bankruptcy proceeding."

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Barack Obama: The Most Arrogant Man in the World

RAND PAUL: GOP NEEDS RON PAUL SUPPORTERS TO GROW

RAND PAUL: GOP NEEDS RON PAUL SUPPORTERS TO GROW
Reports The Des Moines Register:

Sen. Rand Paul, in Des Moines today, said if the Republican Party wants to grow, it needs to include supporters of his father who bring different views on certain issues.

“People talk about it being a big tent – having a big tent means bringing in the Ron Paul people. And if you do, your party will grow,” he said…

Drew Ivers, a Ron Paul campaign official in Iowa, called the changes “growing pains” that are offset by the benefits of growing the party. He said people new to politics can be “zealous” and don’t always understand customary procedures, but they will learn with experience.

Paul spoke at an event sponsored by Americans for Prosperity, a super-PAC that opposes President Obama’s green energy agenda…

Sen. Paul is right. The Ron Paul people are not only growing the GOP–they’re transforming it.

North Korea issues unusually specific threat

By Dylan Stableford | The Envoy

North Korea's military vowed a new and unusually specific threat to its neighbors, saying it would reduce South Korea "to ashes" in less than four minutes.

The statement, released Monday when programming was interrupted on North Korea's state TV by a special report, comes amid rising tensions on the Korean peninsula.

Earlier this month, North Korea was unsuccessful in a long-range missile launch, prompting worries that North Korea may conduct another nuclear test. South Korean officials say new satellite images show that North Korea has been digging a tunnel in what appears to be preparation for a third atomic test.

According to the Associated Press, the statement from North Korea was unusual in promising something soon and in describing a specific period of time.

The North Korean military threatened to "reduce all the rat-like groups and the bases for provocations to ashes in three or four minutes, (or) in much shorter time, by unprecedented peculiar means and methods of our own style."

For months the North has castigated South Korean President Lee Myung-bak and the conservative administration for insulting their leadership and criticizing a new cruise missile capable of striking anywhere in the south.

South Korean officials responded, urging North Korea to end the threats. "We urge North Korea to immediately stop this practice," Unification Ministry spokesman Kim Hyung-suk said, according to the Associated Press. "We express deep concern that the North's threats and accusations have worsened inter-Korean ties and heightened tensions."

Meanwhile, in a meeting Sunday with a North Korean delegation in Beijing, China's senior official on foreign policy praised the leadership shown by North Korea's new young leader, Kim Jong Un.

The meeting follows the April 13 launch of what the United States called a disguised ballistic missile test by North Korea. The rocket disintegrated minutes after launch.