After Municipal Bankruptcy: Lessons from Detroit and other local governments

Source: Pew Charitable Trusts, August 2015

From the overview:
….Until now, lawyers and financial analysts have conducted most post-bankruptcy analyses, focusing on the effect on investors who buy and insure municipal bonds. But state and municipal leaders need to weigh broader impacts on residents and workers. This report offers important lessons from Detroit and other municipalities to help policymakers avoid future financial meltdowns and manage fiscal crises when they do occur. Among the lessons learned:
• Early state intervention in local governments’ financial emergencies can help avert a crisis or possible insolvency.
• When local governments have no options other than filing for Chapter 9 protection, a broad outreach plan that includes all stakeholders throughout the process can help resolve conflicts.
• Once a local government exits Chapter 9, a long-term recovery plan that outlines immediate financial fixes and long-term strategies, such as investing in economic growth, is critical to addressing underlying fiscal problems and preventing future crises.
• By taking active steps to budget over the long term—matching expenses and revenue over several years—local officials can promote fiscal health and increase their city’s capacity to weather the ups and downs of the business cycle.
• Regular monitoring of local government finances can help state officials detect early signs of distress.
• State policymakers can prevent Chapter 9 filings by developing alternatives, such as naming a monitor or temporary manager to restore a city’s finances.