Oral arguments in the largest Chapter 9 case in history drew to a close yesterday, with Connecticut's attorney general saying that Bridgeport's fiscal problems do not justify a bankruptcy filing.
"Much can be done that doesn't involve tremendous tax increases or deep cuts," said Richard Blumenthal, the state's attorney general, speaking in U.S. District Cout in Bridgeport. He contended that the city does not need bankruptcy to avert a projected $16 million gap between now and the June 1992 end of its current fiscal year.
The closing arguments before U.S. Bankruptcy Judge Alan H.W. Shiff came a day after the judge handed down a decision declaring Bridgeport is "generally authorized" under state law to file its petition by virtue of a statute allowing Connecticut cities to enter into legal action.
Judge Shiff said at the close of hearings yesterday that he expected to hand down a decision as quickly as possible on the state's remaining charges against its recalcitrant largest city.
The judge said he would rule "by the end of the month, or in a few days after that."
Connecticut attorneys on June 12 filed a petition to block Bridgeport's bankruptcy, charging not only that the city was not "generally authorized" by state law, but also that Mayor Mary C. Moran had acted in bad faith, overstated her city's fiscal problems, and violated the city charter.
To use the federal Bankruptcy Code, municipalities must meet an insolvency test. They must show either that they are "not paying their bills," or that they are "unable" to pay their bills.
While attorneys for the state contended that Bridgeport is paying its bills batter than ever and therefore is not insolvent, an attorney for the city argued forcefully yesterday that the code's second definition of insolvency refers to a prospective inability to pay creditors.
"The city can't be expected to totally deplete its bank account in order to qualify for insolvency," said James Berman, an attorney with the city's bankruptcy counsel, Zeisler & Zeisler.
Richard D. Zeisler, an attorney with the firm bearing his name, said the state's only proposal for Bridgeport was to take a "meat-ax" to city programs. Chapter 9, he said, would provide a more "surgical and rehabilitative" approach.
He said that although the city will have a cash balance of $12 million when this fiscal year closes, it will run out of money at the end of next summer.
"The state's reading of insolvency," Mr. Berman argued, "is that the city is not eligible for bankruptcy until it is so destitute that bankruptcy would serve no useful purpose."
Mr. Berman said testimony from city officials over the the past six days of hearing showed that budgets for police, public works, and other departments had already been "cut to the bone."
Making further cuts, or forcing the city to the brink of being unable to pay workers, would threaten public safety, Mr. Berman said. "The city can't be compelled under any reading of insolvency" to stop providing protection against crime and fire.
Mr. Zeisler addressed the issue of whether Mayor Moran acted in "good faith" and with the proper authorization of city government when she filed the petition.
Among the charges the state had raised was that the mayor had acted in secrecy and not adequately consulted her own financial officials. "Ultimately, the buck stops at the CEO's office," Mr. Zeisler said, "Her advisers acknowledged that they didn't have a lot of understanding of what Chapter 9 was."
