Camden files for bankruptcy

Camden Courier Post – July 20, 1999

Action brings showdown with state over aid

By HAROLD T. NEDO
Courier Post Staff

Camden

Saying the city would run out of money in two weeks, Camden officials filed for bankruptcy protection Monday in a showdown with the state over financial aid. Gov. Christie Whitman called the action “reckless.”

The filing marked only the second time in more than 60 years that a New Jersey municipality has sought bankruptcy protection.

“The bankruptcy petition is the only thing stopping me from sending all firefighters and police home today,” the mayor said has he walked two blocks from City Hall to United States Bankruptcy Court with other city officials.

Camden sought relief under Chapter 9 of the U.S. Bankruptcy Code, which provides municipalities protection from creditors while they reorganize their debts.

The city, which has for years relied on state aid to meet its budget, faces a projected $24.7 million shortfall in its current $111 million budget.

The filing had no immediate effect on city services or bill payments, and will not affect people who own municipal bonds issued by the city, since they are guaranteed by the state. But a bankruptcy expert recommended that people or businesses owed money by the city file claim forms with the court.

The Whitman administration said it was consulting with the attorney general on what move to take next. Under New Jersey law, the state now can take control of the city’s finances and administration to ensure uninterrupted services
to the city’s 87,000 residents.

“Camden’s action today demonstrates a reckless and irresponsible disregard not only for the city’s taxpayers, but for the state’s taxpayers as well,” Whitman said. “The state pumps more money on a per capita basis $225 per person a month into Camden than any other city in New Jersey. All of the taxpayers of New Jersey have a right to know how that money is being spent.”

The state is withholding an estimated $74 million the city needs to balance its budget for the year which started July 1 because Milan has refused to sign an agreement allowing experts to examine city spending to root out inefficiencies
and point out cost savings.

East Orange, Jersey City, Paterson and Irvington, which are also receiving special state aid as distressed cities, have already agreed to such terms and are receiving their payments.

As possible.

Reaching this goal begins with accountability, a premise that has been roundly rejected at Camden City Hall.

Gerard Banmller, a member of the state board overseeing city spending, said the bankruptcy petition was not done for financial reasons.

“It’s an act of politics,” he said.

Milan said he had hoped to avoid a showdown with the state.

“We’ve done everything we could do to keep the situation from getting to this point. They want to swap money they owe to us for my signature on an agreement that would take power away from future elected officials of this city. I’m not going to do that,” he said.

The city was due last week to receive the first installment, $15 million, of aid needed to make up for revenue the city
loses from tax-exempt state properties. If the aid had been provided, city officials said, the petition would have been
unnecessary.

“While we will continue to pay our bills, the cash we have is only going to last so long without guarantees from the state for additional aid,” said Finance Director Robert Law.

Law said if the city were to pay all of its bills that are due now, it would not be able to meet its upcoming $2.5 million payroll.

He said city workers will get paid Friday but “after that, it’s up in the air.” City employees are paid every two weeks.

The city owes vendors about $8 million and the bond market an estimated $25 million.

Law said the bankruptcy won’t affect city services for at

“I have to ask, ‘What does Camden have to hide?’ said state Community Affairs Commissioner Jane M. Kenny.

In taking this action, the city has sought to manufacture its own financial crisis,” she said. The city has resources to solve its financial problems without resorting to such a seemingly dramatic step. But, at the expense of its citizens, Camden has repeatedly chosen to fight the state’s assistance, rather than welcome it.

City Attorney John A. Misci Jr. said the state was trying to punish the residents of Camden for the mayor’s unwillingness to relinquish control of the city. He said the state wired money to the city last Thursday but that after 10 minutes, withdrew it.

The state is required by law to ensure that all local governments meet their debt and other financial obligations.

“That will continue to be the case in Camden,” Kenny said.No date was set for a hearing on the bankruptcy petition. City Attorney John Misci Jr. estimated it could be in a two or three weeks.

No date was set for a hearing on the bankruptcy petition. City Attorney John Misci Jr. estimated it could be in a two or three weeks.Under federal law, municipalities must receive permission from the state to obtain bankruptcy relief.

Under federal law, municipalities must receive permission from the state to obtain bankruptcy relief. Milan acknowledged that Camden did not receive such authorization, but said he had no choice but to file the petition.

Milan acknowledged that Camden did not receive such authorization, but said he had no choice but to file the petition.Whitman said the state has an obligation to the citizens of Camden and to the taxpayers across the state who are footing the city’s bills to ensure that tax dollars are being spent as wisely and efficiently.

Whitman said the state has an obligation to the citizens of Camden and to the taxpayers across the state who are footing the city’s bills to ensure that tax dollars are being spent as wisely and efficiently

least the next two weeks.

Anything after that point could become critical, Laws said. We hope there is a decision in court by then. We didn’t want to wait until we ran out of cash to file.”

The city’s two-page bankruptcy petition was filed at 12:58 p.m. It did not contain a list of creditors.

The administrative arm of the bankruptcy court scheduled a meeting at 1 p.m. today with the city to discuss a time-table for considering the petition, said Marc Riondiono, the first assistant city attorney. At that time, Riondiono said, they will review the list of creditors.

The administrative arm of the bankruptcy court scheduled a meeting at 1 p.m. today with the city to discuss a time-table for considering the petition, said Marc Riondiono, the first assistant city attorney. At that time, Riondiono said, they will review the list of creditors.

Professor Robert Baileg who teaches public policy at Rutgers-Camden and was a former member of the New York State Emergency Financial Control Board in 1975, urged that the state not take the petition lightly.

Professor Robert Baileg who teaches public policy at Rutgers-Camden and was a former member of the New York State Emergency Financial Control Board in 1975, urged that the state not take the petition lightly.

He said it could reflect poorly on the state.

“The bankruptcy filing might bring attention to why a state of relatively wealthy means like New Jersey has a municipality that has filed for bankruptcy at a time when the country is experiencing an economic boom,” he said.

Former Mayor Angelo Errichetti, who led the city from 1973 to 1981 and now lives in Cherry Hill, said city officials were being unrealistic.

“If you’re going to be taking the state money — if they think they can’t be held accountable for that, they’ve got to be out of their minds, he said.

Courier-Post reporter Carl Winter contribute to this report.

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