See this post on Reuters for discussion about Antioch, latest city in California to talk bankruptcy. There is a bill, sponsored by state senator Mendoza, AB155, that would require cities to go through the state (via the California Debt and Investment Advisory Commission, CDIAC). The bill was referred last week by the Senate appropriations committee — but now appears there will be some further review. The pros and cons line up as follows; cities strongly against state involvement in order to preserve local autonomy; unions and bondholders in favor in order to prevent reduction of obligations, whether they are union contracts or debt obligations. Interesting line-up. Many states have had oversight programs for their distressed communities for years. Distressed designation may trigger grants or aid to distressed municipalities that would not be present in a federal bankruptcy. Some states map out a “receivership” process that gives the state certain intervention rights to reorganize the municipal government and bring finances back into balance. Cities oppose any additional intervention by the state that encroaches on their powers. Pro-union forces in the legislature want to prevent the cities from filing bankruptcy since it may result in reduction of contract provisions (which was determined to be possible in the Vallejo case). So far the pension albatross has yet to be tested. According to Antioch’s 2009 audit the city is obligor on about $27 million certificates of participation, paid through lease agreements, current underlying ratings are Standard and Poor’s “A” and there is MBIA insurance on at least some (maybe all, we didn’t check each series) of the certificates.