In re City of Bridgeport
| Citation | 128 BR 688 |
| Decision Date | 22 July 1991 |
| Docket Number | Bankruptcy No. 91-51519. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — District of Connecticut |
| Parties | In re CITY OF BRIDGEPORT, Debtor. |
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Barbara Brazzel-Massaro, City Atty., Office of City Atty., Richard D. Zeisler, James Berman, Barbara L. Hankin, Roy W. Moss, Zeisler & Zeisler, P.C., Bridgeport, Conn., for City of Bridgeport.
Richard Blumenthal, Atty. Gen., Joan E. Pilver, Asst. Atty. Gen., Hartford, Conn., for State of Conn. and Bridgeport Financial Review Bd William S. Fish, Tyler, Cooper & Alcorn, Hartford, Conn., for amicus curiae Conn. Conference of Municipalities.
Harry B. Elliott, Jr., J. William Gagne, Jr., Gagne & Collins, Hartford, Conn., for amicus curiae Intern. Ass'n of Firefighters, Local 834, and American Fed. of State, County, and Mun. Employees, Council 4.
ALAN H.W. SHIFF, Bankruptcy Judge.
On June 6, 1991, the City of Bridgeport, Connecticut, filed a petition under chapter 9 of the Bankruptcy Code. On June 12 the State of Connecticut and the Bridgeport Financial Review Board1 (together "the State") filed an objection to the petition, see 11 U.S.C. § 921(c),2 asserting, inter alia,3 that Bridgeport was not authorized to be a debtor by state law, see 11 U.S.C. § 109(c)(2),4 and that the petition should be dismissed. The narrow issue addressed here is whether Bridgeport had such authority.
In our democracy, people look to and are served by their elected representatives in national, state, and local government, but our federal system only recognizes the dual sovereignty of the United States and the states. The separation between the powers of the nation and those of the states has been well delineated by the Supreme Court and is not at issue here. See National League of Cities v. Usery, 426 U.S. 833, 842-52, 96 S.Ct. 2465, 2470-74, 49 L.Ed.2d 245 (1976) (); Fry v. United States, 421 U.S. 542, 547 n. 7, 95 S.Ct. 1792, 1795 n. 2, 44 L.Ed.2d 363 (1975) (). What is questioned is the extent of the delegation of the State's powers to its cities in general and to Bridgeport in particular.
It is beyond peradventure that municipalities are political subdivisions of states from which they derive all of their rights and powers. Chapter 9 does not disturb that arrangement, that is, it does not give a city rights and powers independent of the state. Thus, chapter 9 does not give a city the power to file a bankruptcy petition. Rather, it is the state which must decide whether to empower its cities to file. As the Supreme Court stated in United States v. Bekins, 304 U.S. 27, 54, 58 S.Ct. 811, 816-17, 82 L.Ed. 1137 (1938), bankruptcy law is designed so that a state may allow 5 The legislative history of chapter 9 notes that care was taken to recognize state sovereignty: "This bill takes . . . care to insure that there is no interference in the political or governmental functions . . . of the State in its power to control its municipalities." H.R.Rep. No. 595, 95th Cong., 1st Sess 262-264 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6221. Section 903 expressly provides that "this chapter does not limit or impair the power of a State to control, by legislation or otherwise, a municipality of or in such State in the exercise of the political or governmental powers of such municipality. . . ."
Bridgeport, with a population of approximately 140,000, is Connecticut's largest city. The petition states that Bridgeport is the third poorest city in Connecticut based on per capita median income; that it has major health and public safety problems; that it has the highest effective tax rate in Connecticut; and that it is facing a significant budget deficit this year which will increase to $55,000,000.00 in 1992-1993 and $250,000,000.00 within five years. The petition further states that to eliminate this year's budget deficit, Bridgeport would have to raise taxes by up to 18% and/or reduce police and fire protection; street cleaning and snow and garbage removal; and park, recreation, and library services. The petition also alleges that Bridgeport's current budget deficit was caused by, inter alia, the increase in unfunded state and federal mandates for services, the decrease in state and federal revenue sharing,6 the refusal of surrounding suburban areas to share in the expense for social services provided by Bridgeport to persons throughout the metropolitan region, and excessive labor contracts.
The State argues that Bridgeport is not an eligible chapter 9 debtor because:
(1) there is no express or implied authority under state law empowering Bridgeport to be a debtor;7
(2) a city is not generally authorized to be a debtor under chapter 9 unless the state permits the city to control its own operation and financial affairs, including its ability to incur debt, and the state deprived Bridgeport of such control when it enacted Special Act 88-80, as amended8 (Special Act No. 88-80 and its amendments are hereafter referred to as "the Special Act"), and created the Financial Review Board (the "FRB") to exercise control over Bridgeport's budget and financial affairs, see supra note 1; and
(3) the FRB has twice voted to disapprove the filing of a petition.
In response, Bridgeport argues that because it has the power under state law to manage and control its affairs, and in particular the authority to institute any proceeding, see Conn.Gen.Stat. § 7-148(c)(1)(A), infra at 696, it is "generally authorized" by state law to be a debtor. Bridgeport also contends that the powers of the FRB should be construed narrowly, so that its creation by the Special Act did not explicitly or implicitly eliminate that authority. The Connecticut Conference of Municipalities supports Bridgeport's argument that it is generally authorized by state law to be a chapter 9 debtor. The International Association of Firefighters, Local 834, and the American Federation of State, County, and Municipal Employees, Council 4, support the State's position.
The issue of whether Bridgeport is generally authorized by state law to be a debtor under chapter 9 is resolved by an analysis of the following questions:
(1) Was Bridgeport generally authorized to be a debtor under state law prior to the passage of the Special Act?
(2) If the answer to (1) is yes, did the Special Act eliminate that general authority?
(3) If the answer to (2) is yes, did Bridgeport waive or is it estopped from raising any constitutional infirmity in the Special Act?
Was Bridgeport generally authorized to be a debtor under state law prior to the passage of the Special Act?
Code § 109(c)(2), see supra note 4, states that general authorization may be granted either by "State law" or by "a governmental . . . organization empowered by State law to authorize such entity to be a debtor. . . ." The State argues that the FRB is such a governmental organization and that therefore the former source of authority is displaced by the latter. I disagree. The two sources of general authority are joined by "or". Code § 102(5) provides that "`or' is not exclusive. . . ." The legislative history of § 102(5) states that S.Rep. No. 989, 95th Cong., 2d Sess. 28 (1978), U.S. Code Cong. & Admin.News 1978, p. 5814. See also In re Broad Assoc. Limited Partnership, 125 B.R. 707, 711 (Bankr.D.Conn. 1991). Further, in explaining Bankruptcy Act § 84,9 the predecessor of § 109(c)(2), the Senate stated that "in the absence of general statutory consent, this subsection authorizes the chief executive, legislature or any other governmental officer or organizations, so empowered under state law, to authorize the filing of such a petition." S.Rep. No. 458, 94th Cong., 2d Sess. 16 (1975). The lack of authorization from any entity empowered to give it does not affect any general authorization which exists otherwise under state law. Therefore, the issue here is whether Bridgeport was generally authorized pursuant to the clause of § 109(c)(2).
The State argues that for a city to be generally authorized to be a debtor there must be express authorization in a state statute; i.e., specific words in the nature of "bankruptcy" or "debt adjustment" or "reorganization" must be found in a state statute, and that without such affirmative legislative action § 109(c)(2) would violate the Tenth Amendment of the United States Constitution. The thrust of the State's argument is that "generally authorized" must be read as "specifically authorized".10 For the reasons that follow, I disagree.
"A fundamental canon of statutory construction is that, unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning." Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 314, 62 L.Ed.2d 199 (1979). Further, it is well settled that courts are generally not authorized to rewrite statutes. See Badaracco v. Commissioner, 464 U.S. 386, 398, 104 S.Ct. 756, 764, 78 L.Ed.2d 549 (1984); TVA v. Hill, 437 U.S. 153, 194-95, 98 S.Ct. 2279, 2301-02, 57 L.Ed.2d 117 (1978). The word "generally" commonly means a "disregard...
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