Jefferson County, Alabama (Birmingham Metro) Bankruptcy and thoughts on regionalism

Jefferson County, Alabama, home to the state’s largest city, Birmingham, is the latest municipal government to declare bankruptcy and the biggest municipal bankruptcy in U.S. History.  A deal to settle the county’s more than $3 billion in red ink fell apart, prompting County Commissioners to declare bankruptcy in a 4-1 vote.  Jefferson County’s actions follow other bankruptcies in Harrisburg, Pennsylvania; Vallejo, California and Central Falls, Rhode Island.

The decision to file for bankruptcy will no doubt imperil Birmingham’s regional economic development efforts as well as those of the state of Alabama.  On the ground it will likely mean cuts in public services, infrastructure improvements and the size of the municipal workforce.  Jefferson County’s plight involves issues of fraud and public corruption, but the implications of these events should not be viewed in isolation.  Across the nation local governments are stressed under the weight of a fiscal crisis that threatens the often delicate financial balance undergirding cities and metropolitan regions.  As of April of 2010 the Birmingham-Hoover, Alabama metropolitan statistical area had a population of more than 1.12 million and had grown 7.2% since the 2000 census.  Birmingham’s ability to attract new businesses and residents and compete in an increasingly globalized inter-urban competition for capital investment and growth will be impacted by Jefferson County’s woes.  Despite the boundaries that separate Birmingham and the incorporated and unincorporated localities of the Birmingham metropolitan region, Jefferson County’s bankruptcy shows the inherent interdependence of local government.

Local governments are place based enterprises that seek to maximize their relative mix of taxing regimes and infrastructure/service delivery to attract new businesses and residents who will in turn enhance the community’s value, both in real property terms and in its relative brand position.  Many operate off a “if we build it, they will come” approach and leverage future revenue streams to finance infrastructure and service improvements that are the necessary pre-conditions for business and population growth.  Fluctuations in property values and the taxable income of residents can upset the projections and calculations used to support bond-financed improvements.  When public corruption is added to the mix, the results can be disasterous.

The role of municipal boundaries in determining who will be taxed and who will benefit from the redistribution of municipal tax revenue cannot be overstated.  Historically, the politics around the formation and reformation of municipal boundaries have reflected the nation’s race and class struggles.  These factors are related to urban sprawl and intra-regional municipal fragmentation.  Of the many negatives that flow from fragmentation is the proliferation of multiple municipal governments in a given metropolitan area, the duplication in government functions and a lack of coordination in government’s ability to respond to metropolitan region-wide problems.  For several decades now many local government law scholars have argued for more regional approaches to metropolitan governance, touting its social, financial and general functional benefits.  While Jefferson County’s problems apparently stem from a range of issues – some of them isolated factors, the specter of the nation’s municipal government financial crisis begs a reconsideration of regional governance measures that ultimately can lead to more efficient, responsive and cost-effective local governance.

Jefferson County’s road to bankruptcy is profiled here: http://www.reuters.com/article/2011/11/10/us-usa-alabama-jeffersoncounty-idUSTRE7A94CP20111110

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New Article: The City and the Private Right of Action

Professor Paul Diller at Willamette University College of Law has a forthcoming article in the Stanford Law Review on the private law exception to municipal home rule powers.  The abstract and a link to the article are included below:

Cities in most states enjoy broad “home rule” authority – that is, the presumptive power to pass ordinances regulating a wide range of subjects. In many of these states, however, home rule comes with a catch: cities are prevented from passing ordinances that regulate or interfere with “private law.” This article argues that the “private law exception,” as this doctrine is known, is an anachronistic relic of early twentieth century legal thought that ought to be retired outright. This article explains how a subject-based view of the “private law exception,” which prevents cities from passing ordinances affecting subjects like contracts, property, and torts, is largely unenforced today. The more relevant and potent form of the “private law exception,” by contrast, prohibits cities from enacting ordinances that create private causes of action, thereby requiring local ordinances to be enforced by public means only. As this article will show, the potential justifications for the contemporary “private law exception” – preserving uniformity and protecting the interests of the state courts – are not sufficiently compelling to outweigh the costs to local policy experimentation that the exception imposes.

Click here for the full article: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1829788

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