Comments on: How Jefferson County trips up national reporters http://blogs.reuters.com/muniland/2011/12/27/how-jefferson-county-trips-up-national-reporters/ Bridges, budgets, bonds Mon, 24 Nov 2014 00:29:08 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: LITIGATOR1 http://blogs.reuters.com/muniland/2011/12/27/how-jefferson-county-trips-up-national-reporters/comment-page-1/#comment-644 Mon, 02 Jan 2012 17:31:48 +0000 http://blogs.reuters.com/muniland/?p=6323#comment-644 One of the major challanges in the Jeffco Chapter 9 is that the securities at issue are not Bonds, they are Warrants. There appears to be an important question under Alabama law whether a municipality (like Jefferson County) can unilaterally act to raise taxes in order to satisfy these Warrants (assuming Jefferson County even wanted to voluntarily do so)without State approval.

We are currently investigating possible legal claims against certain parties involved with the underwriting of these Warrants.

TURNER LAW OFFICES, LLC
hturner@tloffices.com

Notice: The purpose of this posting is to identify select issues that may be of interest to readers. Under Georgia’s Code of Professional Responsibility, portions of this communication may constitute attorney advertising. This posting should not be construed as legal advice or opinion, and is not a substitute for the advice

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By: LITIGATOR1 http://blogs.reuters.com/muniland/2011/12/27/how-jefferson-county-trips-up-national-reporters/comment-page-1/#comment-643 Mon, 02 Jan 2012 17:21:36 +0000 http://blogs.reuters.com/muniland/?p=6323#comment-643 A major problem here is that the securities at issue are not Bonds, they are Warrants which were never approved by the voters. There appears to be an important question under Alabama law whether a municipality (like Jefferson County) can unilaterally act to raise taxes in order to satisfy these Warrants (assuming Jefferson County even wanted to voluntarily do so)without State approval.

We are currently investigating possible legal claims against certain parties involved with the underwriting of these Warrants.

TURNER LAW OFFICES, LLC
hturner@tloffices.com

Notice: The purpose of this posting is to identify select issues that may be of interest to readers. Under Georgia’s Code of Professional Responsibility, portions of this communication may constitute attorney advertising. This posting should not be construed as legal advice or opinion, and is not a substitute for the advice

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By: Dincesen http://blogs.reuters.com/muniland/2011/12/27/how-jefferson-county-trips-up-national-reporters/comment-page-1/#comment-642 Mon, 02 Jan 2012 01:35:29 +0000 http://blogs.reuters.com/muniland/?p=6323#comment-642 The term general obligation has one meaning in corporate finance but two in public finance. The presumption that a general obligation is an unsecured obligation in bankruptcy is not the case for municipal bonds. About half of all GO bonds outstanding are “secured” GO’s, a seeming contradiction of terms.

A municipal bond is a secured general obligation when voters approve issuance of the bonds and agree to tax themselves at an unlimited rate on real property to pay to pay back the loan. That grant does not apply to other expenses and financial obligations of the issuing locality.

It conveys to bondholders a first and exclusive lien on revenue derived from the taxation of real property. Hence the term secured general obligation more commonly known as voter approved unlimited tax GO’s.

Several state constitutions bar use of these monies for any purpose other than repayment of bonds secured in this manner. These bondholders have a higher position than creditors of corporations can attain. The bonds are essentially immune to adjustment under chapter nine of the federal bankruptcy law.

Federal courts have not shown much of an appetite to overturn contracts entered into by public vote pursuant to state constitutional law.

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By: maynardGkeynes http://blogs.reuters.com/muniland/2011/12/27/how-jefferson-county-trips-up-national-reporters/comment-page-1/#comment-641 Thu, 29 Dec 2011 17:20:58 +0000 http://blogs.reuters.com/muniland/?p=6323#comment-641 Walsh may have misstated a few things, but she has made an important point. GO apparently doesn’t mean what most investors think it does. The idea behind GO bonds is that they are supposed to be supported by the taxing power, which is theoretically unlimited. Of course bankruptcy courts should be able to discharge GO debt at some point, but shouldn’t that be only after the taxing power has at least been tried? What is shocking to me and possibly to many other GO investors is that the bankruptcy court can screw over the GO bondholders without even trying to order the municipality to honor its obligation to employ its taxing power to avoid default. Ok, the bankruptcy law is what it is, but it seems like bad law has been made here. This situation will raise funding costs for municipalities if the meaning of “full faith and credit” actually turns out to be that “we will only raise taxes if we feel like it,” which politicians rarely do. That is the point of the article, and I think it is a good one.

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