Predictors of Municipal Bankruptcies and State Intervention Programs: An Exploratory Study

68 Pages Posted: 11 Nov 2016 Last revised: 1 Jun 2021

See all articles by Laura Coordes

Laura Coordes

Arizona State University - Sandra Day O'Connor College of Law

Thom Reilly

Arizona State University (ASU) - Morrison Institute for Public Policy; Arizona State University (ASU) - School of Public Affairs

Date Written: September 22, 2016

Abstract

Why do some struggling cities file for bankruptcy while others, facing similar circumstances, do not? This Article builds on the literature examining the causes and consequences of municipal fiscal distress by exploring specific factors that lead municipalities to seek help from the state and federal government. Viewing municipal opportunities and constraints through political, economic, and legal lenses, this Article helps to explain the nuances of municipal decision making.

After identifying eight factors that may serve as predictors of municipal insolvency, we studied cities in fiscal distress with an eye toward uncovering the circumstances that led each of these cities into and, if applicable, out of, their financial predicaments. Union density, unfunded pension liability, and financial mismanagement were the three most prevalent factors in our sample population. Our analysis suggests that scholars and policymakers should focus their efforts on using bankruptcy relief in conjunction with state aid programs in order to address these primary sources of municipal distress more comprehensively.

Suggested Citation

Coordes, Laura and Reilly, Thom, Predictors of Municipal Bankruptcies and State Intervention Programs: An Exploratory Study (September 22, 2016). 105 Kentucky Law Journal 493 (2017), Available at SSRN: https://ssrn.com/abstract=2867610

Laura Coordes (Contact Author)

Arizona State University - Sandra Day O'Connor College of Law ( email )

Box 877906
100 S. McAllister Ave.
Tempe, AZ 85287-7906
United States

Thom Reilly

Arizona State University (ASU) - Morrison Institute for Public Policy ( email )

411 N. Central Ave, Suite 900
Phoenix, AZ 85004-0692
United States

Arizona State University (ASU) - School of Public Affairs ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ
United States

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