This document contains information from a presentation given by Bill Brandt on September 21, 2012 regarding restructuring of sovereign and municipal debt. It includes tables and charts with statistics on municipal bankruptcy filings from 2000-2012, job losses during recessions, home price declines, housing starts, foreclosure rates, and pension funding levels for various states. It also provides biographical information about Bill Brandt's experience in insolvency consulting and involvement in bankruptcy policy work.

1. A Brief Primer on the Current Status of
Restructuring Sovereign & US Municipal Debt
Bill Brandt
“The Politics and Principles of Restructuring”
California’s Fiscal Crisis: Prospects for Deficit Reduction
and Pension Reform in the Golden State
September 21, 2012 • IGS, Berkeley, California
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2. CHAPTER 9 BANKRUPTCIES, 2000 TO DATE
Date Municipality Population
04/2000 City of Westminster, Texas 390
09/2000 Town of Tyrone, Oklahoma 880
The table shows the cities, towns,
11/2000 City of Macks Creek, Missouri 267
villages and counties that have filed for
06/2001 City of Kendleton, Texas 466
Chapter 9 municipal bankruptcy since
11/2001 Village of Hinsdale, Missouri 1,477
the turn of the century. Stockton,
12/2001 City Of Desert Hot Springs, California 16,582
California, became the most populous
06/2002 City of Rio Bravo, Texas 5,553 city to file for Chapter 9 and the
11/2002 City of Reeds Spring, Missouri 465 second-biggest of any municipality
10/2003 Village of Brooklyn, Illinois 676 since 2000, according to Census
10/2003 City of Iron Mountain Lake, Missouri 693 Bureau data. The average population
04/2004 City of Westminster, Texas 390 among the 19 municipalities filing for
05/2004 Village of Washington Park, Illinois 5,345 bankruptcy before the 18-month
12/2004 Town of Millport, Alabama 1,160 recession starting in December 2007
01/2005 Village of Alorton, Illinois 2,749 was about 2,260. For the 12
04/2005 Town of Muldrow, Oklahoma 3,104 municipalities filing during of after the
08/2005 City of Camp Wood, Texas 822 downturn, the average population was
01/2006 Town of Marshall Creek, Texas 431 99,083. Still, “for the most part,
12/2006 Town of Moffett, Oklahoma 179 Chapter 9, has been used by small
02/2007 Town of Marion, Mississippi 1,305 municipal utilities and special tax
04/2008 City of Gould, Arkansas 1,305 districts, and rarely by larger
05/2008 City of Vallejo, California 116,760 municipalities,” Jim Spiotto, a
04/2009 Westfall Township, Pennsylvania 2,430 bankruptcy attorney with Chapman and
07/2009 Village of Washington Park, Illinois 5,345 Cutler LLP in Chicago, wrote in March.
10/2009 Town of Moffett, Oklahoma 179 As Spiotto pointed out this week, a
total of 95 municipalities, including
10/2009 City of Prichard, Alabama 28,633
those municipal utility and special tax
03/2011 Boise County, Idaho 7,028
districts, have filed for Chapter 9 since
08/2011 City of Central Falls, Rhode Island 19,376
2000.
10/2011 City of Harrisburg, Pennsylvania 49,528
-Brian Chappatta and Steven Church
11/2011 County of Jefferson, Alabama 658,466
06/2012 City of Stockton, California 291,707
07/2012 Town of Mamoth Lakes, California 8,234
Source: Bloomberg, Census. Used with permission of Bloomberg L.P. Copyright©
2012. All rights reserved.
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3. % Job Losses in Post WWII Recessions
1948 1953 1958 1960 1969 1974 1980 1981 1990 2001 2007
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49
Number of Months After Peak Employment
Source: Data360 Data as of June 30, 2011
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4. Home Price Index-Decline from Peak
100%
95%
90%
85% BOSTON
80% NEW YORK
75%
MINNEAPOLIS
70% COMPOSITE
CHICAGO
65%
L.A. SAN DIEGO
60%
55%
50% MIAMI
45% PHOENIX
LAS VEGAS
40%
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71
Months Since Peak
Data as of August 31, 2011
Source: Standard & Poor’s / Case-Shiller
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5. New Privately Owned Housing Units Started
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
1960 1969 1974 1980 1981 1990 2001 2007
% Change in Housing Starts Following the Beginning of a Recession
(3-Year Post-Recession Average)
Source: U.S. Census Bureau
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6. Foreclosed Homes in 2010
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Source: RealtyTrac.com
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7. Lag Effect
Fiscal 2011 Property Tax Revenues Based on
2008-09 Market Values
Value
Collection Levy Calculated
Year Year As Of Based on the Market Period
2006 2005 July 1, 2004 January 1, 2003 to June 30, 2004
2007 2006 July 1, 2005 January 1, 2004 to June 30, 2005
2008 2007 July 1, 2006 January 1, 2005 to June 30, 2006
2009 2008 July 1, 2007 January 1, 2006 to June 30, 2007
2010 2009 July 1, 2008 January 1, 2007 to June 30, 2008
2011 2010 July 1, 2009 January 1, 2008 to June 30, 2009
2012 2011 July 1, 2010 January 1, 2009 to June 30, 2010
Example from the notes of the audited financial report of a Colorado school district
Source: Moody’s
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8. Combined Liabilities as Share of GDP
Top 10 States
Debt/GDP Pensions/GDP
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Source: Moody’s Investors Service
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9. Numbers/Facts
Among the 50 states, there are:
 218 separate state pension plans
 2,332 local pension systems
State of Delaware
 Pension system is nearly fully funded
 Credit rating is AAA
State of Indiana
 Public Employees Retirement System is 94% funded
 Teacher Plan is 43% funded
State of New Jersey
 Public Employees Fund is 56% funded
 Local Fund is 71% funded
 Teacher Plan is 64% funded
Source: Kotok, David. (2011). Munilan and Pensions. Cumberland Advisors.
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10. Financial Condition of the State
Retirement Systems
(Dollars in Billions)
$150
$140
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
$30
$20
Total Assets Total Liabilities
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11. Net Tax-Supported Debt & Unfunded Pension
Liabilities as % of GDP: U.S. States Compared
to Advanced G-20 Nations
U.S. States U.S. Federal Debt Advanced G-20 Nations
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
2006 2007 2008 2009 2010
Source: Moody’s Investors Service & International Monetary Fund
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12. Teachers in Illinois: 2001 to 2010
2001 2010 % increase
# of Annuitants 65,000 98,000 51%
Benefits Paid $1.6B $4.1B 156%
Average Salaries $50,000 $66,000 32%
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13. State of Illinois Pension Plans
Unfunded Actuarial Accrued Liability
$90.0
Unfunded Liability
$80.0
All State Pension Systems Combined
$70.0 Dollars in Billions
based on Market Value of Assets
$60.0
$50.0
Billions
$40.0
$30.0
$20.0
$10.0
$0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Fiscal Year Ending June 30
Source: 6/30/09 CGFA Report
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14. What caused the Change in the Unfunded
Pension Liability?
UNFUNDED PENSION LIABILITY
FY1995 VS. FY2003
(in $ billions)
$42.2B
$45.0
$0.3
$40.0 $5.8
All Other Factors
$35.0 Benefit Improvements
Investment Losses $6.4
$30.0 Contribution Shortfall
Unfunded Liability: 7/1/95
$25.0 $10.6
$20.0
$15.0
$10.0 $19.1B $19.1
$5.0
$0.0
FY1995 FY2003
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15. BILL BRANDT
BILL BRANDT has been in the business of workout, turnaround and insolvency consulting for more than thirty years and is widely
recognized as one of the foremost practitioners in the field. He is President and CEO of Development Specialists, Inc. (“DSI”), a firm
specializing in the provision of management, consulting and turnaround assistance to troubled or reorganizing enterprises. Mr.
Brandt and his firm continue to be involved with some of the more celebrated financial restructuring cases in the nation’s
history, including Mercury Finance Company, Southeast Banking Corporation, Malden Mills, the Keck, Mahin & Cate law firm, the
Coudert Brothers law firm, the Ohio “Coin Fund” scandal, and the Bernie Ebbers Settlement Trust.
Mr. Brandt has advised Congress on matters of insolvency and bankruptcy policy, and in that capacity was the principal author of the
amendment to the Bankruptcy Code permitting the election of Trustees in Chapter 11 cases. He was also involved in drafting several
amendments to the Bankruptcy Code enacted into law in April 2005 as part of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, which substantially rewrote the nation’s bankruptcy laws. During the Clinton administration, he served as a
member of the President’s National Finance Board as well as serving as a delegate from the State of Florida to the 1996 Democratic
National Convention. During that decade as well, and upon the invitation of both business and political leaders in the People’s
Republic of China, Mr. Brandt worked with various public policy, law and banking leaders in that country on approaches to the
reorganization and restructuring of some of China’s state-owned industries. In 2000, he served as a member of the Democratic
Party’s National Convention Platform Committee. In 2002, he served on the Illinois Gubernatorial Transition Team as well as on the
State of California’s Business Delegation dispatched to Cuba to discuss politics, business and trade. In 2008, Mr. Brandt served as a
delegate from the State of Illinois to the Democratic National Convention.
By Gubernatorial appointment, Mr. Brandt is serving his second consecutive term as Chair of the Illinois Finance Authority, having
been first appointed in 2007 and then reappointed in 2010. The IFA is one of the nation’s largest self-financed entities principally
engaged in issuing taxable and tax-exempt bonds, making loans, and investing capital for businesses, non-profit organizations and
local government. The Governor has also appointed Mr. Brandt to the Illinois Broadband Deployment Council, which works to ensure
that advanced telecommunications services are available to all the citizens of Illinois. He serves as a member of the National Advisory
Council for the Institute of Governmental Studies at the University of California at Berkeley, while also serving as a member of the
Board of Trustees of Loyola University Chicago, and is a life trustee of Fenwick High School in Oak Park, Illinois. Additionally, he was
also featured in What Happened, a documentary film humorously chronicling the dot-com “bust,” which premiered at the New York
City Film Festival.
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16. BILL BRANDT
Mr. Brandt has written for publications that span a broad spectrum of thought, ranging from Maclean’s, Canada’s Weekly
Newsmagazine, to Directors & Boards, Corporate Board Magazine, the Florida Real Estate Journal, and the American Bankruptcy
Institute’s Law Review, published in conjunction with St. John’s University School of Law. He is the co-author of the “Due Diligence”
chapter in the 2nd edition of Bankruptcy Business Acquisitions published by the American Bankruptcy Institute. He is a frequent
lecturer and speaker on topics of corporate restructuring, bankruptcy and related public policy issues and regularly appears on
CNN, CNBC, CNNfn, Bloomberg, and Canada’s BNN, as well as the CBS Radio and National Public Radio networks. He has been
profiled and interviewed in a wide array of periodicals including, among others, The Wall Street Journal, The New York Times, The
International Herald Tribune, Business Week, The Miami Herald, The Chicago Tribune, The Boston Globe, Billboard Magazine and Bank
Bailout Litigation News.
He served several terms as a member of the Board of Directors of the American Bankruptcy Institute, as well as also serving several
terms on the Advisory Board for that organization’s Law Review. He served for almost 20 years as a member of the private Panel of
Trustees for the United States Bankruptcy Court for the Northern District of Illinois and briefly served as a member of the same panel
for the Bankruptcy Court in the Southern District of Florida in the late 1980s. He is a member of the Executive Committee of the
Bankruptcy Section of the Commercial Law League of America and serves on their National Government Affairs Committee. Mr.
Brandt is a member of the Board of Advisors for the American Bankruptcy Institute’s Bankruptcy Battleground West seminar held
annually in Los Angeles and is also currently serving his third consecutive three-year term as a member of the Board of Directors of
the San Francisco Bay Area Bankruptcy Forum. In addition to the Commercial Law League of America and the American Bankruptcy
Institute, he holds memberships in the National Association of Bankruptcy Trustees, the International Council of Shopping Centers
and the Urban Land Institute.
His biography appears in a number of reference works including Who’s Who in America, Who’s Who in Finance and Industry, and
Who’s Who in American Law. For well more than a dozen years, his firm, Development Specialists, Inc., has been rated as one of the
outstanding turnaround firms in the world by the publication Turnarounds & Workouts. Mr. Brandt has also been routinely listed in
the K & A Restructuring Register, an annual roster of the country’s top 100 restructuring advisors. He received his B.A. from St. Louis
University and his M.A. from the University of Chicago, where he also completed further post-graduate work toward a doctoral
degree.
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17. About Us
DSI Civic specializes in government financial restructuring and reorganization; debt
restructuring; forensic auditing; and negotiations - including vendors, bargaining
units, regulatory bodies, investors and financial institutions.
DSI Civic has been a leading provider of management, consulting, and financial
advisory services for more than thirty-five years, successfully crafting and executing
strategies for government officials, corporations, regulatory agencies, not-for-profit
organizations, and court-sanctioned committees protecting the rights of retirees and
pension holders.
DSI Civic recognizes the dramatic differences between realigning government
bureaucracies and realigning commercial enterprises. We understand the complex
and fundamentally different rules and regulations, and the political and
communication imperatives associated with any difficult change.
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18. The experts you trust.
The insight you need.
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