July 27, 2009

Indiana town may seek court protection

A $1.45 million sewage plant project may have broken the budget for Georgetown, Ind., where officials have said they are considering declaring bankruptcy.

A rarity among U.S. municipalities, a bankruptcy would be the first for a local government in Indiana, where the option for a town to declare itself a debtor does not exist in the state's bankruptcy code, Brian Bailey, an attorney at the Indiana Department of Local Government Finance said.

Town officials, however, approved an ordinance to give elected officials that option under the state's Home Rule Act, The Louisville, Ky., Courier-Journal reported Monday.

The town's Council President Billy Stewart said, there is no way for Georgetown to meet its obligations. We don't have it.

Professor Ann Gellis, at Indiana University's Maurer School of Law agreed that Home Rule "¦ does not authorize any municipality to be a debtor.

The town's attorney David Andrews, said otherwise. The Home Rule Act gives us virtually any power that we want to exercise, he said.

It would still be a rarity in the United States.

The American Bankruptcy Institute said 33 local governments have filed for bankruptcy since 2004. In the peak year, 11 local governments filed for bankruptcy in 2005.