DISQUS

moneyguy · 5 months ago

Then give Conseco and Lucas back to the state and dissolve the CIB. Drop it in the states lap and let Daniels and he Legislator run it more efficiently. It puts the city council (especially the Republicans) in a better light. That's what I would do! Opps I forgot no more free Colts and Pacers tickets. Darn good idea though :)

pogden297 · 5 months ago

Chris, no one disputes that the legislature has to give authorization for bankrtupcy so I don't know why this continues to get raised. If CIB and City leaders went to the legislature and asked for the authorization they would likely get it. You even point out that they are tired of dealing with the matter and won't take it up again. That makes it more likely they would provide the authorization, if asked, not less.

Any bankrtupcy authorization is an individual authorization that has no effect whasoever on any other unit of government's ability to file. Giving the CIB authority to declare BK, has no effect on Southport filing BK, for example. The CIB is not even funded by property taxes like other units of government.

Even Pre-BK, it would give the CIB enormous leverage to renegotiate contracts. (Not that they understand the concept of leverage.) The argument that it will work in reverse to give others the opportunity to get out of theiir contracts, doesn't fly. They are contracts. The fact that the CIB is considering filing BK does not give them the right to get out of their contracts. And post-filing, they are still locked in and could only get out through the BK judge. Pre and post they have no leverage to renegotiate their contracts. The leverage would all be in the direction of the CIB.

It's a more valid argument to say that it might affect future contracts. The problem with that argument though is that this is not liquidication bankruptcy but reorganization bankrutpcy under Chapter 9. There is not going to be any interruption in business. Further, those booking conventions are paying the money TO the CIB, not the other way around. It would be a different matter if those bringing convention business to the city were a creditor of the CIB, especially if the CIB were filing Chapter 7.

I'm not sure you recall, but during the meeting Council attorney Elrod mentioned sometthing that keeps getting overlooked. The CIB may not have any choice regarding bankrtupcy. A creditor can force the Board into BK, even without an authorization from the legislature. The CIB would undoubtedly qualify for BK.

As far as privatization, a private company is going to be stuck with the contracts the CIB negotiated. The CIB gave away almost all the income on LOS. Why would they want to take it over? Even if you did, you'd have to pay the company a management fee that would have to make it a profitable exercise for the company.

Again, as far as privatization, there might be one or two companies that bid on such a venture and then we'd end up giving them a 10 or possibly 20 year contract. That's not privatization. That's monopolization. Privatization has to be about bringing market forces to the delivery of services. If it is not, you end up in worse shape than you were before. Have we forgotten the FSSA privatization disaster?

Again, as far as privatization, it is envitable that it becomes a source of political patronage for politicians. Knowing this city's history, they'd give the contract to some politically-connected company and write such terms that everyone wins but taxpayers.

Back to BK, my concern about it is as follows: 1) even if you got leverage through a BK authorization, the CIB would not know how to use it. There seems to be no understanding of how to negotiate and how to use leverage in negotiations. (Remember these are the folks still insisting on giving the Pacers $15 milllion more per year, in the midst of a huge deficit, when the team has no leverage to extract the money.); 2) it does not do any good to declare BK, rewrite contracts and restructure debt if the underlying behavior that led CIB to its situation doesn't change. It's the exact same thing with private individuals who declare BK. Often they simply run up the debt again.

pogden297 · 5 months ago

I would add that although a BK filing would not have an effect on existing debt the CIB has, it would raise the price of the CIB borrowing more. Once the debt is restructured though the CIB should not have to borrow nor do we want them borrowing.

A good point brought up is possible spillover affecting the bond rating of the City. We're all just speculating whether that could or would happen and what the effect would be. The fact is Chap. 9 BK is so rare, you probably can count on the experts in Chapter 9 on one hand. You'd want to consult with one of those experts.

One of the good things about Chapter 9 is that, due to federalism, it is a one-sided process in favor of the muncipality. The BK judge, for example, can't order the CIB's property sold. You're suggesting that is a negative. That's actually what we want. We don't want a Chapter 11 filing and then see the judge sell of the CIB's assets. Again, Chapter 9 is very favorable to the municipality. It is the creditors who get screwed over in a Chap. 9.