This Is What a Fiscal Meltdown Looks Like, Part V: Big Legal Fees

quicksandAs creditors close in and the City of Petersburg struggles to avoid default, it is spending large sums on legal and consulting fees. In the latest litigation, the city has hired the Richmond-based law firm Sands Anderson to fight an Oct. 4 order by a Petersburg Circuit Court Judge appointing a special receiver to ensure that city residents’ wastewater payments are forwarded to the regional sewage treatment agency.

In his order, Circuit Court Judge Joseph M. Teefey Jr. appointed an attorney from Richmond-based LeClair Ryan as the receiver. Presumably, the city will be responsible for covering LeClair Ryan’s fees as well.

The city is in more than $1 million in arrears in its payments to the South Central Wastewater Authority because it diverted wastewater revenues to other uses. The appointment of a receiver could trigger a default in other obligations, including more than $10 million in water, sewer and stormwater revenue-backed bonds.

Those debts include clauses specifying that the appointment of a receiver automatically constitutes an “Event of Default,” reports the Progress-Index.

“If the receivership is not vacated and the multitude of bond defaults described herein are triggered, it is expected that any short-term or long-term debt restructuring to facilitate … cash-flow relief for the city … will be extremely difficult to obtain,” states the city’s motion.

Meanwhile, City Council also hired the Robert Bobb Group, a municipal turn-around group, to help the city work through its financial woes. The principal of the group, Robert Bobb, was city manager of Richmond from 1986 to 1997 and was instrumental in rooting out corruption and turning around the deficit-plagued Detroit school system. Sources have told WRIC News that the consulting fees could cost $300,000.

Bacon’s bottom line: It has to be galling for secretaries, police, fire fighters and other city employees to swallow pay cuts while the city is doling out funds for high-priced lawyers and consultants. But what is the alternative? Roll over and play dead? Sadly, the city is caught in legal quicksand now. The harder it struggles to stay afloat, the more it racks up big professional fees that it can’t afford. The moral of the story for everyone else: Don’t let yourself get caught in Petersburg’s situation.


One Comment

  1. ksmith8953

    I can understand why Petersburg’s water bill fiasco is now in receivership. What do they possibly have to argue — why they should be allowed to use funds paid for with taxpayers money for other purposes? Petersburg should be ashamed. The current interim city manager has told them what they need to do, but evidently, she is not in a fraternity or sorority of someone on city council and therefore, is not considered. Are either of these firms affiliated with a fraternity or sorority of someone on City Council? Interesting question. Conflict of interest is something this City Council didn’t think about in their recent trial and error hiring of a new City Manager. As a taxpayer, I am totally undone.