Judge: Boise County can't avoid legal judgment by declaring ...

Boise Couty sought bankruptcy protection earlier this year after a $4 million judgment against the county ? but a judge on Friday dismissed the county?s Chapter 9 filing after determining that the county had failed to prove it is insolvent.

Chief Judge Terry L. Myers of the United States Bankruptcy Court, District of Idaho, said in a 43-page decision that the county is ineligible to be a debtor under Chapter 9.

?We do not know the effect of this yet in our ultimate planning, and will notcomment,? Boise County Commission chairwoman Jamie Anderson said via e-mail Friday.

D. Blair Clark, the attorney representing the county in its bankruptcy filing, said he had not yet had a chance to read the decision by Judge Myers and would not comment without reading it first and consulting with his client.

"We are pleased with the court's decision and we are looking forward to seeing if we can't work this out with Boise County," said Tom Banducci, an attorney with the Boise law firm representing the development company, Oaas Laney, that sued the county. We hope to get the legal wrangling behind us and get the judgment paid and move forward."

It is rare for municipalities to file for bankruptcy ? Chapter 9 in the code. There have been just 625 filings since the the option became available in 1937, according to James Spiotto, a Chicago-based attorney who has authored numerous books on the topic.

Most local governments that have filed bankruptcy have done so because of massive bond debt.

Spiotto said Friday that about one-third of all cases are dismissed for failure to meet requirements of code or voluntarily withdrawn.

In December, a federal jury determined that Boise County had violated the federal Fair Housing Act in its handling of an application for a proposed teen treatment center called Alamar Ranch.

The jury awarded developer Oaas Laney $4 million in damages. The county says it also owes the plaintiffs? attorney fees of about $1.4 million.

Several settlement attempts were made between late January and March. Myers? decision contains information on those talks between the county and Oaas Laney?s attorneys.

On Feb. 22, the county offered to pay $3.2 million, including $1.9 million in cash immediately, funds raised from a 3 percent increase in property tax levy for a 10-year period and any proceeds from a lawsuit against county insurer ICRMP. The county also offered Alamar Ranch principals forgiveness on $164,000 in past due taxes on its properties.

There was a caveat, however, that if these methods didn?t generate sufficient funds to satisfy the $3.2 million offer in 10 years, the remaining balance would be forgiven.

The Alamar developers rejected the offer.

On March 1, the county filed a petition for protection under Chapter 9. ?This protects us so we can continue to operate,? Anderson said at the time.

In its bankruptcy filing, the county listed assets of $27.7 million and liabilities of $7.3 million, including the $4 million judgment and $1.5 million in plaintiffs? attorneys fees, according to Myers? decision.

The county?s 2011 budget anticipates expenditures of $9.3 million.

The Chapter 9 filing temporarily blocked creditors from trying to collect. Once Myers? order is entered, creditors may begin pursuing money they are owed, Spiotto said Friday.

Myers determined that Boise County was ineligible for Chapter 9 because it did not prove it was insolvent at the time of filing. To meet that burden, according to federal law, would mean ?generally not paying its debts as they become due unless such debts are the subject of a bona fide dispute, or unable to pay its debts as they become due.?

The county pointed to $550,000 in medical indigency claims that had not paid as debt not paid when due, but Myers said that doesn?t represent ?general non-payment of debts? but rather failure to pay a single category of claims.

Furthermore, he said, the County Indigent Fund contained more than enough to cover those costs and projected claims for the rest of the year.

Myers also rejected the county?s claim that it could not both pay the Alamar judgment and continue to cover the cost of daily county operations. It said use of its $10 million in cash and investments was largely restricted by federal and state law.

?The Court finds the County?s arguments unpersuasive,? Myers wrote, noting that county officials provided little evidence of such restrictions or limitations on those funds.

Katy Moeller: 377-6413

Source: http://www.idahostatesman.com/2011/09/02/1783814/judgeboise-county-cant-avoid-legal.html

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