A defiant Mayor Mary C. Moran of Bridgeport, Conn., yesterday appealed a federal bankruptcy judge's ruling that the city was not insolvent and therefore did not qualify for the court's protection.
As she filed a notice of appeal in the U.S. District Court in Bridgeport, Mayor Moran said the city's finances are caught in a legal Catch-22: The city has $27 million of cash on hand, a fact that hindered attempts to show its insolvency to the bankruptcy court.
But at the same time, state law mandates that Bridgeport save most of that money -- $25 million left over from a 1989 deficit borrowing that the state of Connecticut backed -- for cash-flow purposes.
Filing the notice of appeal just hours before a court-imposed deadline, the mayor kept alive her historic quest to use Chapter 9, the section of the bankruptcy code for municipalities.
Municipal bankruptcy experts say it is the first time that a large city has tried to file under the Bankruptcy Code. Bridgeport's population is roughly 140,000.
With bankruptcy counsel Zeisler & Zeisler, the city now has 15 days to file the text of the appeal, which will outline the specific reasons behind the city's disagreement with Judge Alan H.W. Shiff's Aug. 1 ruling that the city was not insolvent.
The state of Connecticut, which has opposed the city's bankruptcy filing from the start, has a week to appeal another decision by Judge Shiff. That decision, handed down July 26, said Connecticut statutes provide ample legal ground for the state's cities and towns to file Chapter 9 without specific approval.
Richard Blumenthal, the state's attorney general, could not be reached for comment yesterday on whether the state would appeal that ruling, but observers said they expect an appeal.
In a statement released yesterday, the mayor said she went to Hartford last week seeking emergency aid from the state. But Gov. Lowell P. Weicker Jr. set conditions that Mayor Moran said she could not meet: that the city not appeal Judge Shiff's Aug. 1 ruling: that it not rely on its $27 million cash reserve to close its budget gap; and that it raise property taxes.
A spokeswoman for the governor, however, yesterday rebutted Mayor Moran's claims.
"The governor laid out a series of options for the city of Bridgeport, all the time acknowleding that the decision as to how to proceed rested with the mayor," said Avice A. Meehan, Gov. Weicker's press secretary.
In her statement yesterday, Mayor Moran said that Gov. Weicker's set of conditions "runs contrary to everything I've been striving for these many months."
The mayor defended the process that led her to file a Chapter 9 petition. "I want to stress that the filing in June was based on solid and exhaustive study, along with an absolute resolve to face the facts," Mayor Moran said, according to a press release issued yesterday.
Chapter 9's insolvency test requires filers to show they are not paying debts as they come due or that they face an imminent possibility of not being able to pay debts.
In his decision Aug. 1, Judge Shiff fleshed out the insolvency criteria, holding that the city had to be able to foresee a default on its debt during the current fiscal year or in the coming fiscal year's budget if the budget had already been adopted.
One legal expert said that although the city will not be able to use new evidence in its appeal, it may argue that the district court should interpret the bankruptcy code differently.
In July hearings, attorneys for Bridgeport tried to forecast an inability to meet payments in fiscal 1993, for which the city has yet to adopt a budget.
The city last month announced plans to use its $27 million cash reserve to bridge its budget gap. The city said Judge Shiff's ruling that the city was not insolvent, in large part because of its $27 million in cash, means that the money can be used by the city to comply with a state mandate for budget balance.
"The Chapter 9 declaration was, in effect, the instrument that made these funds available," Mayor Moran said yesterday.
In addition, the city last month announced plans to hire 100 new police officers to cope with what it said was an unprecedented number of murders so far this year. The plan would cost the city $2.5 million this fiscal year.