State bankruptcy law gains traction

A contested piece of municipal bankruptcy-limiting law has neared approval as the state Legislative session draws to a close Friday.
AB 506, by Assemblyman Bob Wieckowski, D-Fremont, gained traction last month after the Legislature returned from its summer break.

Earlier in the summer, the bankruptcy bill, the third since Vallejo filed for Chapter 9 protection in May 2008, was stripped to its “intent language” by Sen. Lois Wolk, chairwoman of the Senate Governance and Finance Committee.

In August, a modified version of the bill appeared again on the floor of the Senate, which has since voted in support two of the three needed times to pass. Opponent League of California Cities’ legislative director Dan Carrigg said the controversial bill was reworked, but without input from dissenting bodies.

“It’s sort of coming back with a new set of clothes on … it’s changed slightly from a structural standpoint,” Carrigg said.

Carrigg said the League and a coalition of opponents hope the bill will be sent back to the drawing board and carry over into the next legislative session, rather than win final Legislature approval.

The bill would modify state law to require that cities seeking bankruptcy protection engage in a mediation process before heading to court. The mediator, chosen by a state-appointed commission, would determine whether the municipality had negotiated in good faith, among other tests, prior to giving leave for a court filing.

If approved by the Senate, with any changes confirmed by the Assembly, by week’s end the bill would head to the governor for his signature.