Support and aid from the government, often referred to as “entitlements,” are there to help. Similarly, President Trump declared on the campaign trail he used the tax laws to his advantage – essentially resulting in write-offs lasting 10 or more years.
Are the welfare recipients or Trump “cheats,” for lack of a better word? No, they take/took what the government gave them through programs, and again, as long as they are following the law.
I just did my taxes for 2016; why should I itemize if the standard deduction is greater? I am not cheating by taking the larger amount, just following what is allowed.
Why then shouldn’t the City of Prescott declare bankruptcy, in an attempt to sidestep its state pension “unfunded liability” or debt?
While the city could do it, we need to ask is it the best move? Let’s examine this a bit.
Like any legal action, there are pluses and minuses. Lately it seems that public opinion is siding more with the “plus” column. Cases in point, according to Forbes magazine: the cities of Vallejo, California, and Central Falls, Rhode Island, both filed for bankruptcy as a way out of excessive pension obligations (surprise!) that dwarfed their annual budgets.
Municipalities have been allowed to file bankruptcy since the Great Depression, when Congress decided that counties and cities needed help from creditors when tax revenues dried up. Chapter 9 was created for this purpose in 1937 and since then, 624 municipalities have filed for relief (the largest was Detroit in 2013).
The City of Prescott currently owes upwards of $81 million related to its state pension debt for public safety personnel.
Bankruptcy may be among the options for dealing with the debt, but several council members say it would hurt the city not only financially, but in other ways as well — such as damaging the city’s public relations, tourism and economy.
Consider that one leg of the stool of success for the city is sales tax-based. It is not manufacturing, but tourism dependent. During the Great Recession, Prescott did fairly well until tourists opted to stay closer to home. The result was a dip in visitors and, thus, sales tax revenue.
Then there’s whether the city can afford it or qualifies (yes, bankruptcy is not free).
Some municipalities have spent millions of dollars in legal costs for bankruptcy and have still not solved their financial problems, City Attorney Jon Paladini told the council recently, adding that “bankruptcy is not a cheap option.”
Further, prerequisites for municipal bankruptcy exist, including insolvency; a desire to adopt a plan to adjust debt; negotiation with creditors (which Paladini said would include all of the state retirees); and a show of good faith.
City officials have stressed that Prescott with its many assets — such as Antelope Hills Golf Course, the public library, and rodeo grounds — is far from insolvent.
Finally, when considering bankruptcy, one has to note that the debt may be absolved but the problem remains: the state retirement system for public safety personnel still needs reform.
So, just because you can declare bankruptcy does not mean you should.