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Tuesday, March 15, 2005 | Victor Vilaplana, a San Diego attorney, specializes in bankruptcies, and is a Fellow of the American College of Bankruptcy. He is a supporter of San Diego Mayor Dick Murphy, and his firm, Seltzer Caplan McMahon Vitek, represents the city’s retirement board.

In my impression, right now the city does not qualify (for bankruptcy). A bankruptcy judge requires that a city be insolvent which means it’s not paying its debts as they come due. The city, as far as I know, is not in default on any obligations.

There is a second test – that a city may not be able to pay its debts in the future. That’s a little harder to quantify, but the courts have generally said cities must take some effort to generate revenue to pay future bills. A city just can’t decide it won’t tax itself any further. It’s a gray area how much a city must do to generate sufficient revenue to pay bills.

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