As Goes Vallejo, So Goes Pittsburgh?

Chris Briem notes that the federal bankruptcy filing by the city of Vallejo, CA is going forward -- to his surprise, and dismay. Chris wonders whether the case will set some kind of precedent for Pittsburgh, which is teetering on the edge of a financial precipice that is steeper and deeper than Vallejo's.

Like Chris, I wonder whether bankruptcy is really in Pittsburgh's future. But I'm not as certain that Vallejo sets a precedent that Pittsburghers should be paying attention to.

Judges, even federal judges, are inevitably political creatures. They read the newspapers, they know who is who (and who is not), and they know where they live. With federal bankruptcy judges, who don't have life tenure, this is especially true. More than any class of judges that I've ever encountered, bankruptcy judges are pragmatists. And bankruptcy lawyers are pragmatists, too.

What that means is that "precedent" in the legal system sometimes plays a different role in the bankruptcy arena than it plays elsewhere. No man is an island, and no bankruptcy estate is like any other. Pragmatics and flexibility are supposed to be the hallmarks of the bankruptcy system. So, is Vallejo "like" Pittsburgh for bankruptcy purposes? On the surface, sure: The city doesn't have much of an economic engine, and accumulated fixed liabilities are daunting. But beneath the surface, not so much: Vallejo hasn't had a stand-alone economic identity for many decades. It's part of the San Francisco Bay Area, and a not-very-important part these days at that. As far as the Bay Area economy is concerned, Vallejo can slide into the Bay (or the Sacramento River delta) and few people outside the town will notice. For the most part, the regional economy will motor onward.

In pragmatic terms: Pittsburgh, it almost goes without saying, plays a somewhat different role in the economy of Southwestern Pennsylvania. A bankruptcy filing by the City might be legally and economically warranted, but as a practical matter the publicity surrounding a proceeding might be enough, all on its own, to doom what remains of the region's economic potential. Vallejo can't take anything down with it. Pittsburgh could take everything down. I suspect that the bankruptcy bar and the bankruptcy bench might be aware of that.

Comments

4 Responses to "As Goes Vallejo, So Goes Pittsburgh?"

Anonymous said... 9/08/2008 2:19 PM

"The city doesn't have much of an economic engine, and accumulated fixed liabilities are daunting."

You only need to add: denial (check), political apathy (?), and a union funded city council.

Pitt is probably much more like Vallejo than you suspect. WAKE UP!

Bram Reichbaum said... 9/08/2008 4:00 PM

I didn't know you were so cynical about pragmatism -- I know it can work both ways -- but on the surface it seems like you've nailed it. Pittsburgh will not tend toward bankruptcy as Vallejo, as I am imagining it, did.

Mike Madison said... 9/08/2008 4:05 PM

Actually, I'm a great fan of pragmatism. At least until the recent "reforms," the American bankruptcy system was a very strong and useful institution, and I encourage my law students to seek jobs as interns and clerks with bankruptcy judges.

As for "waking up," I'm not sure what that comment means. Pittsburgh has much more in common with Birmingham, Alabama than it does with Vallejo. Have you ever been to Vallejo? I have.

EdHeath said... 9/11/2008 11:26 AM

I may be wrong, but city bankruptcy seems to be something of a brinkmanship game. I think that because although it is a Federal filing, the state is the 800 pound gorilla in the room. Right now there is a democratic Governor in Pennsylvania, so I think there is political pressure on Ravenstahl not to consider bankruptcy. Additionally, I think Ravenstahl has a lot invested in pretending that the problems are being dealt with. But we see Ravenstahl casting about for possible solutions for our debts and under funded pensions – City County merger, a pool of city pension plans in the state, starting new non-union employees on a defined contribution plan. I don’t believe any of those efforts will help our present situation, but it is telling that Ravenstahl is making a point of being public about them.

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Pittsblog 2.0 is written by Mike Madison, a law professor at the University of Pittsburgh. Send email to michael.j.madison[at]gmail.com. Mike also blogs at Madisonian.net, on law and technology. Chris Briem of Null Space drops by from time to time.

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