66.400 Municipalities may go into bankruptcy -- Approval of state local debt
1,553 words·~7 min read·
/ky/66-400A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
officer and state local finance officer required for county -- Municipality may
not file if delinquent in contributions to retirement system -- Liens on bonds or
leases -- Public property exempt from seizure -- Judgments against local
government -- Exceptions. (Effective April 1, 2021)
(1)As used in this section:
(a)"Bond" has the same meaning as in KRS 66.011 and is issued according to the
provisions of KRS 66.011 to 66.191;
(b)"Lease" has the same meaning as in KRS 65.940 and is entered into under the
provisions of KRS 65.940 to 65.956; and
(c)"Local government" has the same meaning as in KRS 44.001.
(a)Except as otherwise provided by this section, any municipality as defined in
the United States Bankruptcy Code, 11 U.S.C. secs. 101 et seq., and acts
amendatory and supplementary thereto or acts extending the date of expiration
thereof, as the same may be amended or extended from time to time, may file
a petition for the composition of its debts and to do all things necessary to
comply with the provisions of the United States Bankruptcy Code.
(b)No county shall file a petition as provided in the United States Bankruptcy
Code unless the proposed plan is first approved by the state local debt officer
and the state local finance officer, as defined in KRS 68.001. No changes or
modifications shall be made in the plan of composition after the filing of the
petition without the approval of the state local debt officer and the state local
finance officer. The state local debt officer and the state local finance officer
shall approve or disapprove the proposed plan of composition or any changes
or modifications thereof under the same procedure and for the same reasons as
bonds are approved or disapproved under KRS 66.280 to 66.390.
(c)No municipality may file for bankruptcy protection under the United States
Bankruptcy Code if it is in default or is delinquent in the payment of
contributions due under KRS 78.510 to 78.852.
(a)The revenues of a tax adopted:
1. According to KRS 66.111(1) for the payment of bonds shall be deemed
pledged for the payment of the principal of and the premium and interest
on the bonds; and
2. According to KRS 65.942(2) for the payment of a lease shall be deemed
pledged for the payment of the principal and interest portions of a lease
payment and any prepayment penalties on a lease;
whether or not the pledge is stated in the bonds, the lease, or in the
proceedings authorizing the bonds or the lease.
(b)The holders of all bonds issued and leases entered into shall have a first lien
on those tax revenues.
(c)There shall be a statutory lien on the tax revenues pledged in favor of the
holders of all bonds issued and leases entered into, effective by operation of
law, that shall apply to all outstanding bonds payable from taxes adopted
according to KRS 66.111(1) and leases payable from taxes adopted according
to KRS 65.942(2), without priority of one
(1)bond or lease over another bond
or lease, regardless of when the bonds were issued or the lease was entered
into.
(d)No filing need be made under the Uniform Commercial Code or otherwise to
perfect the lien on the tax revenues.
(e)The pledge of the tax shall constitute a sufficient appropriation, and the tax
revenues shall be applied as required by the pledge, without the requirement
for further appropriation.
(4)Amounts appropriated for the payment of any obligation that is subject to annual
renewal, including but not limited to leases entered into under the provisions of
KRS 58.010 to 58.205 or KRS 65.940 to 65.956, shall be deemed pledged for
payment according to subsection (3)(a) of this section, and the holders of all bonds
issued or leases entered into shall have a first lien on those appropriations
commencing on the date of the appropriation.
(a)The public property of any local government, of every character and
description, used for government or public purposes, is exempt from seizure
by attachment, execution, or other legal process, except as provided in
subsections
(7)and
(8)of this section.
(b)A local government's funds in the hands of its treasurer or a depository shall
not be subject to garnishment or other legal process, except as provided in
subsections (6), (7), and
(8)of this section.
(a)Except for judgments covered under KRS 65.2004, any local government
against which final judgment has been rendered for a claim that is not fully
covered by insurance may make a motion to the Circuit Court to enter an order
for the payment of money damages, in whole or in part, through a periodic
payment schedule for a period of time not to exceed ten
(10)years.
(b)A court entering an order in response to a motion made by a local government
under paragraph
(a)of this subsection shall consider the ability of the local
government to pay the judgment without a substantial disruption to the
essential public services provided by the local government. The court shall
consider the following factors in evaluating the motion and in setting a
periodic payment schedule:
1. The funds available in the local government's current fiscal year and
other funds available to the local government to pay the damages in the
remainder of the local government's fiscal year during which the final
judgment was entered;
2. The total revenues reasonably expected to be collected by the local
government in subsequent fiscal years based upon the historical
collections in previous fiscal years;
3. The total expenses of the local government in subsequent years for the
costs associated with the provision of essential public services, the
payment of debt service for the existing obligations of the local
government, and any other expenses reasonably necessary for the
efficient administration of the local government, including personnel,
operation, and maintenance costs associated with existing infrastructure,
and new costs which may be reasonably anticipated for the local
government; and
4. If the award for damages is an amount that exceeds twenty-five percent
(25%) of the total revenues collected by the local government in the
immediately preceding fiscal year, the court may also consider any
revenue or debt financing options that are reasonably available to the
local government that could be employed to help satisfy the judgment.
(c)An order entered by the court establishing a periodic payment schedule shall
specify the total amount awarded, the amount of each payment, the interval
between payments, and the number of payments to be paid under the order.
(d)Any judgment paid pursuant to the periodic payment schedule established
under this subsection shall bear interest accruing from the date final judgment
is entered at one-half (1/2) the interest rate provided by KRS 360.040.
(e)Upon petition to the court, the court may modify a periodic payment schedule
established in this subsection for good cause shown by the local government.
The modification may include changes to the amount of payments, the number
of payments, and the period of payments, but in no case shall an adjustment
pursuant to this paragraph alter the total amount of damages to be paid,
exclusive of interest, in the original order.
(7)Subject to the provisions of subsection
(6)of this section, a court may enter an order
providing for the attachment, execution, garnishment, or seizure by other legal
process of public property, including moneys, of a local government only upon a
finding that:
(a)The local government has failed to comply with an order, modified order, or
judgment entered by the court as provided by subsection
(6)of this section or
KRS 65.2004;
(b)After a period of twenty-four
(24)months, the local government did not
petition the court to enter an order for the payment of money damages, in
whole or in part, through a periodic payment schedule as provided by
subsection
(6)of this section or KRS 65.2004 and has not paid in full the total
damages awarded under the judgment; or
(c)The judgment for damages was not of the type that permitted the court to enter
an award of periodic damages, and the local government has failed to pay the
damages due in full after the passage of twenty-four
(24)months from the
entry of a final judgment.
(a)Any order providing for the attachment, execution, garnishment, or seizure by
other legal process of public property, including moneys, of a local
government shall not impair the ability of the local government to continue to
provide essential services to the public, including the payment of key
personnel needed for the provision of those services and those employees
necessary for the collection of revenues on behalf of the local government.
(b)In making a determination as to the appropriate extent of an order under this
subsection, a court shall consider but shall not be limited to the factors
provided in subsection (6)(b) of this section.
(9)Nothing in this section shall:
(a)Bar the pursuit of any other remedies that exist to enforce a judgment under
state law; or
(b)Prohibit a local government and a judgment creditor from entering into an
agreement for the payment of damages under terms and conditions that differ
from the remedies and process established under this section.