Who Pays the Price? The Necessity of Taxpayer Participation in Chapter 9

24 Widener L.J. 81

39 Pages Posted: 13 Jun 2014 Last revised: 17 Mar 2015

See all articles by C. Scott Pryor

C. Scott Pryor

Campbell University - Norman Adrian Wiggins School of Law

Date Written: March 12, 2015

Abstract

Even though taxpayers are not creditors and have no right to vote on a municipal plan of adjustment, bankruptcy courts should afford a presumption that they are parties in interest on the issue of feasibility of a plan. Without a party adverse to a plan settled by a city and its creditors, a bankruptcy court runs the risk confirming one that will ultimately fail because the ultimate stakeholders--a city's taxpayers--will not pay. In other words, while increased taxes and decreased municipal services are standard fare in recent Chapter 9 cases, with recognition as parties in interest, those who must pay more and receive less deserve a direct voice in the process.

In addition, an official committee of taxpayers whose professional expenses will be borne by the municipality should be appointed in sizable Chapter 9 cases. The cost of effective representation of collective taxpayer interests exceeds the benefit to any individual taxpayer. Such representation is a public good whose costs should be borne from the public fisc.

Keywords: Chapter 9, municipal bankruptcy, standing, party-in-interest, taxpayers

JEL Classification: K19, K39, L39

Suggested Citation

Pryor, C. Scott, Who Pays the Price? The Necessity of Taxpayer Participation in Chapter 9 (March 12, 2015). 24 Widener L.J. 81. Available at SSRN: https://ssrn.com/abstract=2448997 or http://dx.doi.org/10.2139/ssrn.2448997

C. Scott Pryor (Contact Author)

Campbell University - Norman Adrian Wiggins School of Law ( email )

225 Hillsborough Street
Raleigh, NC
United States
919.865.4650 (Phone)

HOME PAGE: http://law.campbell.edu/

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