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A prominent bankruptcy lawyer who has steered at least two California cities through their bankruptcy proceedings recently sat down with The Wall Street Journal to talk about how cities can avoid insolvency and why California isn’t doing more to help them.Marc Levinson, 57, represented the cities of Vallejo and Stockton in bankruptcy proceedings and recently negotiated a $4 million settlement between the city of Hercules and its creditors.
If you see bankruptcy in your future, try to cut expenses now, Levinson says.
“Go to the unions and start making concessions now and then go to creditors and start negotiations,” Levinson told WSJ.
Those concessions could stave off future financial problems, like strikes or other costly disagreements.
The Vallejo case, which he calls a “trial by fire,” was his first major Chapter 9 proceeding.
But just because Vallejo was successful — it came out of insolvency about three years after filing for bankruptcy — doesn’t mean the rest of the country should follow suit.
Bankruptcy is the option “when there are no other choices,” according to Levinson. “Bankruptcy is not a good option until it’s the only option.”
While he says he understands why states don’t do more to help flailing towns, Levinson said it “would be incredibly helpful to locals if the state stepped in and helped, but instead there is the opposite.”
But if one town gets help, then every town will want help. However, Levinson said there is still a major problem in the relationship between states and towns.
“I believe the core problem is that California as a state is a net taker, rather than a giver, and local governments are hurting because of it,” Levinson told WSJ. “And overall, the reality is the state’s economic picture is more than likely far worse than most of its cities.”
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