Skip to comments.Bankruptcy filed, tiny town hopes to rise again
Posted on 04/26/2008 11:11:59 AM PDT by fella
Bankruptcy filed, tiny town hopes to rise again BY DEBRA HALE-SHELTON
Posted on Saturday, April 26, 2008
The small southeast Arkansas town of Gould had just $ 10 in petty cash and owed more than $ 900, 000 when it filed for Chapter 9 bankruptcy, according to court documents.
The filing with the Eastern District of the U. S. Bankruptcy Court shows the Lincoln County town of just 1, 305 residents owes $ 224, 282. 48 to the Internal Revenue Service.
Gould Mayor Juanita Stephens said Friday that she broke a City Council tie of 3-3 by voting to file for the bankruptcy. At 71, Stephens said shes trying to save the town where shes lived her entire life.
Stephens said the bankruptcy petition is not going to shut the city down. Its just going to help us regroup and see where we are.... Ive been trying to cut down on a lot of things. I made some people mad, but I just cant help it. Little Rock lawyer James F. Dowden, representing Gould, said Friday that he suspects part of the IRS debt is interest and penalty. Its my hope that... maybe we can whittle that down by asking them to waive the penalties or forgive the interest, he said.
The bankruptcy petition, filed Monday, estimates Goulds liabilities at $ 901, 589. 18. Total assets are listed as $ 322, 985, with $ 50, 000 of that coming from 46 acres of property and 13 city lots and $ 112, 218. 83 from unpaid fines. The citys other assets included three shotguns, three pistols and one bullet-resistant vest valued in total at $ 500. Four firetrucks ranging from a 1956 Chevrolet to the newest, a 1979 Ford altogether were valued at $ 2, 500. Among the towns many creditors are the IRS; the Arkansas Department of Finance and Administration, owed $ 30, 933. 60 for withholding taxes; Arkansas Natural Resources, owed $ 317, 895 for water and sewer improvements; an Illinois mosquito-control company, owed $ 2, 776. 43; the Lincoln County jail, owed $ 32, 108; and the U. S. Agriculture Departments Rural Development agency in St. Louis, owed $ 200, 212.
Stephens blamed Goulds problems partly on poor bookkeeping, on money it has had to pay as the result of past lawsuits and on an employee not having submitted payroll taxes.
Rather than pay the payroll taxes, it was spent on other things, she said. Rather than tell the [city ] council we dont have the money for this, it just went unpaid off and on for quite a few years. Stephens, who took office in 2007, said she knew the towns finances were in a mess, but had no idea how bad they were when she ran for office. She said shes already laid off all of the towns eight or nine police officers except for one full-time and two part-time officers. Shes also laid off one street worker. In 2007, she declined a salary for the job which she said is a full-time position, but this year is taking $ 14, 400 in pay.
I love Gould. It just breaks my heart to see the shape its gotten into, the mayor said by telephone from City Hall. Ten years ago, the city had money. Its just not here now. Dowden said Chapter 9 bankruptcy is reserved for municipalities and is extremely rare. He said there have been fewer than 100 such cases filed nationally since 1978.
The U. S. Courts Web site says such municipalities may include cities and towns, villages, counties, taxing districts, municipal utilities and school districts.
Computer records dating to 1980 for the U. S. Bankruptcy Courts Eastern and Western Divisions in Arkansas show just one other town, tiny Ozan in Hempstead County, has sought Chapter 9 relief. That town of fewer than 100 residents filed in 1995.
Far more prominent was the 1994 filing in California by Orange County, a suburb of nearly 3 million people south of Los Angeles.
Dowden said Chapter 9 is parallel more or less to Chapter 11 business reorganization, except that, unlike a Chapter 11 company that defaults, you cant go to the city of Gould and say, OK, you guys didnt meet the standard; so, were going to liquidate you. In Chapter 9 bankruptcies, the U. S. Courts Web site notes, that there is no provision in the law for liquidation of the assets of the municipality and distribution of the proceeds to creditors. That typically is done by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt with a new loan, the site says.
If these were your assets, you'd better believe that the values would be far higher when it came to paying your property taxes.
Just say this town sold bonds to raise monies for projects.
When BK is filed, what happens to those bonds? Are they flushed? Or do the bond holders become the owners of the projects they were sold to raise monies for?
Well, that town’s credit is now shot to hell! LOL
If the tax rebate - stimulus - giveaway - whatever - doesn’t work — this will become more common. Your question is important...
If they are going to claim that 4 firetrucks are only worth $2,500 - I think that they should be forced to accept the first offer in that amount.
Where do I send the check?
Our state is very close to heading down the BK path. Selling bonds has been the common method for raising money for anything and everything.
That is a good question. ......................Hhmmmmmmmmmm ................. Maybe ............. Just maybe you Can sue city hall. But then that would only ensure that the lawyers got any money worth getting.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
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