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Bridgeport, state withdraw appeals on bankruptcy.

Joseph P. Ganim, the new Mayor of Bridgeport, Conn., along with the state's attorney general, last week made a joint announcement that both the city and state were withdrawing their opposing appeals in the city's historical municipal bankruptcy case.

Under the terms of the joint statement, which remain to be approved by Bridgeport's Common Council on January 27, the largest municipal bankruptcy petition in the nation's history would end without a final resolution.

The agreement would leave unchanged, however, a lower federal court decision setting a precedent for all cities and towns easing access to the option of filing a petition with the federal courts for a city or town to seek protection from creditors while reorganizing municipal debt.

This access has always been available to corporations and private individuals. It was not made fully available to local governments until former President Reagan signed new legislation in 1988. The Bridgeport case marked the first time the new, federally created authority had been tested in court.

Ganim had criticized former Mayor Mary Moran for initiating the bankruptcy protection filing and said he would seek to drop the appeal if elected.

The city had prevailed over the state in federal bankruptcy court last summer when the state challenged the city's right to seek protection from creditors under the new federal law. But then the court denied the city the protection because it could not demonstrate it was within a fiscal year of exhausting all possible revenues.

The state appealed the lower court decision, maintaining that federal law prohibits a city from seeking federal protection absent a specific provision of authority under a state law or constitution. The city appealed, saying access to protection should be delayed so long that it fails to meet its intended purpose of allowing a city to reorganize its debts. These were the specific appeals which were dropped.

The agreement to drop the perspective appeals came after considerable negotiation and agreement by the state to be more responsive the city's fiscal crisis. Prior to the filing the only state response had been to insist that the city raise property taxes substantially.

Since Ganim's election, the state has indicated it is prepared to assume responsibility for the city's roads and bridges and railroad station. In addition, there are other ongoing negotiations between the state and city on other responsibilities.

Even with the mutual efforts to work together, the city still faces a current year deficit of $20 million out of a $320 million budget for the fiscal year ending this June 30.
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Title Annotation:Bridgeport, Connecticut, under new mayor Joseph P. Ganim, has agreed to drop its bankruptcy appeal
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Article Type:Brief Article
Date:Jan 27, 1992
Words:423
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