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Municipal Bankruptcy Bill Sent to Assembly Floor

Opposition Letters Needed Immediately

May 11, 2012

On Thursday, AB 1692 (Wieckowski), a surprising attempt to unravel last year’s AB 506 (Wieckowski), was pulled from the Assembly Appropriations Committee and sent to the Assembly floor. It could be heard as early as Monday, May 14. City officials are strongly encouraged to send opposition letters immediately.

 

The League and other local agencies reached a deal last year on AB 506 after long negotiations which included Sen. Lois Wolk (D-Davis) and Gov. Jerry Brown. Less than five months after the law took effect, AB 1692 seeks to undo critical provisions of the deal.

The cities of Stockton and Mammoth Lakes are currently engaging in a good faith effort — using the provisions of AB 506 — to address issues with their creditors and hopefully avoid a bankruptcy filing. AB 506 should be given a chance to work before any new legislation attempts to change it. 

AB 1692 reverts back to concepts advanced in earlier versions of AB 506 that local governments strongly opposed including:

  • Removing the terms “mandatory mediation” and “mediator” as terms that describe the neutral party. This was pivotal to addressing the League’s concerns in the final agreement on AB 506.
  • Empowering the evaluator with arbitrator-like independent decision-making authority. These powers were removed as part of the final agreement on AB 506.
  • Changing the circumstances in which the parties agree to continue in mediation, by removing the required concurrence by the affected public entity. The ability for parties to trigger delays was a major concern with earlier versions of AB 506. The May 5 amendments to AB 1692 have been represented by the author as removing this provision, but the amendments removed only one of the two applicable provisions in the measure.

AB 1692 is certainly bad policy. Moreover, it contributes to the atmosphere of distrust between local governments and the state, calling into question the validity of future local-state negotiations on this and other matters.

The League’s opposition letter and a sample letter are available on the League’s website by typing “AB 1692” into the search box.



 
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