SB 105, introduced by Sen. Charbonneau addresses the adjustment of debt by a political subdivision – generally allowing the distressed unit appeal board (“board”) to arrange for the governing of the political subdivisions affairs to get it out of debt, including through bankruptcy.
First, the bill changes the definition of an “economically distressed subdivision” from one that will have its property tax collection reduced by at least 5% to one that is designated as such by the board. Next, it reduces the board to a three member board consisting of the the director of the office of management and budget, the commissioner of the department of local government finance, and the state examiner of the state board of accounts. Significantly, I think, it eliminates members from political subdivisions, currently: one nominated by the Indiana Association of Cities & Towns, one nominated by the Association of Indiana Counties, and one nominated by the Indiana Association of School Superintendents. It also gets rid of the member appointed by the Speaker of the House of Representatives.
In addition to the fiscal body (as is the case currently) it allows the political subdivision’s executive or even its creditors (if they hold a large enough stake) to petition for the economically distressed designation. It eliminates the requirement that a petition to the board have a proposed plan to get the subdivision out of trouble. The board can impose the designation if the subdivision satisfies one or more of a list of indicators of troubled finances. (I do take exception to the one that says “The political subdivision has failed to make required payments to judgment creditors for thirty (30) days beyond the date of the recording of the judgment.” – I can see where you thought you’d win a case, get tagged with a big, unbudgeted judgment, and it takes more than 30 days to arrange the financing.) But, generally, the list consists of things that shouldn’t happen if the unit is functioning reasonably well: missing payroll, defaulting on bond payments, etc.
Once the designation is applied, the board appoints an emergency manager for the political subdivision that serves at the pleasure of the board. The manager is given enormous power, except the power to raise taxes. Otherwise, he or she is given the authority and responsibilities of both the executive and the fiscal body of the political subdivision concerning the adoption, amendment, and enforcement of ordinances and resolutions. He or she can unilaterally reduce salaries of employees, renegotiate union contracts, and generally seems to have unbridled power over the subdivision’s finances. He or she can also recommend to the board that the subdivision petition for Chapter 9 Bankruptcy Protection.
To me, this thing doesn’t at all strike the right balances. You have a small group of state officials – without anything in the way of input from local officials, even as consultants – who can take over a political subdivision without much second guessing. Then, their appointee can come in and wreck the joint with powers, individually, that seem to exceed those that were available in the aggregate to the people actually elected by the citizens of that subdivision.
Thinking of the damage some distant state bureaucrats could do to the good stuff we have going in Tippecanoe County gives me the willies. Fortunately, for the county – and, for the most part the other subdivisions – we’ve had some excellent officials who have done a good job meeting budgets; so maybe we’re not in too much danger. But, still – from my neck of the woods, the medicine seems too strong for the ailment.