Reviving cities: Legal remedies to municipal financial crises

Local fiscal crises are by no means a negligible phenomenon. In the last thirty years, a significant number of the nation's cities have suffered from serious financial strain, and several large and important cities such as New York, Philadelphia, and Miami have even experienced full-blown crises where they did not have sufficient resources to finance basic public services. In this Article, I discuss the legal remedies developed over the years to address local insolvency - creditors' remedies, Chapter 9 of the Bankruptcy Code, and state financial boards - and I explain the logic and limits of each remedy. My analysis suggests that state financial boards are the most effective response to a local crisis. Using both theoretical arguments and examples of actual cases, I describe the advantages of this remedy, and explain how it should be successfully implemented in legislation. Using the case study of North Carolina, I show that such legislation can improve local fiscal health and facilitate huge interest-rates savings on a regular basis.