Detroit: What Goes Around, Comes Around; Lessons Learned From NYC

Buried deeply in this article reported by Reuters:

Under a change to Chapter 9 bankruptcy law that was made while New York was in difficulties in the 1970s, municipalities can instead argue that good-faith negotiations are impractical.

Detroit has made this argument.

"Despite the ultimate impracticability of such negotiations, the City nevertheless attempted, where possible, to negotiate with its various creditor constituencies in good faith," Detroit said in court papers.

Because municipal bankruptcies are rarer than corporate ones, there are fewer precedents. But Detroit can point to a ruling from June involving the California city of Stockton to make its case.

U.S. Bankruptcy Judge Christopher Klein in Sacramento ruled that even if Stockton had not negotiated in good faith, it was still eligible for bankruptcy because such negotiations would have been impractical given it had 2,400 retirees.

It's an interesting article.