Bankruptcy for the City of Pacific Grove seems to be off the table for the foreseeable future. The Budget and Finance Committee received quotes from various law firms for services from handling inquiries to completing a filing, and after looking at the costs the full council decided not to “explore or pursue chapter 9 bankruptcy further at this time.”
Costs ranged from $25,000 to $1,250,000. One audience member suggested that the city get the papers ready anyway so they could be filed at a moment’s notice, but the council was advised that this would not be an option, let alone an inexpensive one.
City Attorney David Laredo also advised the council about the ongoing appeal in the 9th Circuit Appellate Court concerning the bankruptcy of the city of Vallejo, which could potentially be overturned on certain questions about their very eligibility for bankruptcy. “We should wait for the decision of the 9th District,” he said, adding that “it is not prudent to prepare a petition at this time.” The decision may turn on questions about Vallejo’s efforts to avoid bankruptcy, negotiate with debtors, and prepare a plan for becoming solvent.
Jim Becklenberg, Director of Management and Budget, presented some pros and cons on the money side of the question. He pointed out that reserves are up and unfunded liabilities are down, with the possible exception of CalPERS retirement costs, and that the city is “headed in the right direction.” Further cost-cutting enacted earlier in the council agenda “will help us continue to live within our means,” he said.
“The city is not insolvent,” said Becklenberg. The statement was number one on his list of arguments for tabling bankruptcy discussions. He believes that Pacific Grove’s financial health is stabilizing, he said, and he is concerned about the long-term effects bankruptcy filing would have on the city’s credit. “We borrow every year” as a matter of course, he pointed out. “And outstanding questions about the process need to be answered first.”
He also reminded the council that such a move could pre-empt regional collaboration efforts to reduce police and fire costs.
Mayor pro tempore Vicki Stilwell was against filing or retaining a bankruptcy specialist. “It’s a ridiculous waste of money at this time,” she said. Deborah Lindsay concurred.
Councilmember Alan Cohen wanted to wait for the appeal court’s decision and have the city attorney work on the question the committee had prepared.
Bill Kampe reminded the council that the Budget and Finance Committee had learned “You don’t get as much out of bankruptcy as you might hope.” He, too, voted with the majority to take the matter off the table for now.
Mayor Dan Cort, presiding over what may be his last council meeting as mayor, said that he felt Jim Becklenberg was doing a great job whittling away at the budget gap and keeping the city solvent. “Bankruptcy casts a pallor over the city,” he pointed out, asking the rest of the council not to take any money out of the fragile treasury.
Lisa Bennett and Carmelita Garcia preferred the option of retaining special counsel to answer the city’s questions about bankruptcy. “We spent a lot of time on these questions in committee,” said Bennett.
