STUMP » Articles » RIP, James Spiotto, Municipal Bankruptcy Expert and Advocate for Long-Term Solutions » 28 February 2020, 15:33

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RIP, James Spiotto, Municipal Bankruptcy Expert and Advocate for Long-Term Solutions  


28 February 2020, 15:33

I’ve learned that public finance expert James Spiotto has suddenly died at the age of 73.

James Spiotto, leading voice on muni bankruptcy, dies

James E. Spiotto, a legendary voice in the municipal industry for his bankruptcy and restructuring expertise that influenced governments, investors and federal lawmakers, died suddenly on Thursday. He was 73.

Spiotto retired from his law practice in 2013 but was far from ready to take it easy, his friends and colleagues said. He co-launched the Chapman Strategic Advisors LLC serving as a consultant and providing his insights on major market events, such as Detroit’s Chapter 9 and Puerto Rico’s bankruptcy under the Puerto Rico Oversight Management and Economic Stability Act of 2016.

Spiotto also joined Richard Ciccarone, president of Merritt Research Services, as joint owner and joint publilsher of where Spiotto continued to share his sharp opinions and recommendations on bankruptcy, governmental fiscal distress, and other topics influencing and affecting the market.

I first came to know about Spiotto due to the website.James Spiotto has been a vocal advocate of sustainable public finance practices, including proper restructuring of debt in bankruptcies.


Obviously, I’ve had material from Spiotto on my site:

Here are some excerpts:

On Dallas pension problems:

The pension mess came about through a familiar set of circumstances. Back in the early 1990s, workers were offered generous benefits that included a guaranteed return rate of 8.5 percent on individual savings accounts. In order to pay for such benefits, the board engaged in some risky investments. “They had some investments in real estate that unfortunately turned out to be disastrous,” says James Spiotto, managing director of Chapman Strategic Advisors. “They promised a high return. They earned far less than that.”

That was an understatement.

An overview of municipal bankruptcies:

Only 64 bankruptcies have been filed by cities, counties, towns and villages since 1954, according to James Spiotto, an attorney who tracks municipalities’ bankruptcies.

On Detroit exiting bankruptcy:

A full recovery for a municipality the size of Detroit may take more than a decade, said James Spiotto, managing director at Chapman Strategic Advisors, which advises on financial restructuring. The city needs to reinvest, focus on economic development and attracting businesses and residents, he said.

“You’ve got to stay the course,” Spiotto said. “You’ve got to keep fiscal responsibility as a key issue.”

I emailed James a few times on the bankruptcy statistics at MuniNetGuide, which helped me get an idea of activity in the area. It’s kind of tough, as muni bankruptcies are far more infrequent than, say, corporate bankruptcies.


A couple years back, I co-wrote a piece on public pension reform with James Spiotto, along with W. Gordon Hamlin, Jr. and Andrew M. Silton.

Embracing Shared Risk and Chapter 9 to Create Sustainable Public Pensions.

I will excerpt a piece of it in a moment, but here is my nutshell description:


There are two parts to the idea:

A sustainable defined-benefit pension, with risk-sharing elements
A legal mechanism by which current pension liabilities can be transferred to this risk-sharing system

James Spiotto, with his municipal bankruptcy experience, helped crafted that second item with the other lawyers in our group.

Here is the concept, from our article:

There is no reason to follow the “free-fall” Chapter 9 example of Detroit, which spent $170 million on professional fees. Municipalities instead can follow the lead of corporations, which in the 1980’s and 1990’s developed prepackaged bankruptcies to avoid these unwelcome aspects of bankruptcy. Section 1126(b) of the Bankruptcy Code is applicable to Chapter 11’s as well as Chapter 9’s, and provides an expedited process by which a debtor may propose and confirm a Chapter 9 plan. Under this provision, a prospective municipal debtor may solicit consents for a proposed plan from its creditor constituencies and thereafter file a petition under Chapter 9.

The case law now permits municipalities to alter their pension obligations in Chapter 9 proceedings, even if statutes or constitutional provisions prohibit impairment of contracts. Some 24 states currently permit Chapter 9 filings, with some requiring approval by a state official. States which have not granted such approval, like Illinois, could do so with an enabling statute.

The concept is to structure a pre-packaged Chapter 9 bankruptcy for municipalities [not states, which require a different approach], and to transition current pension plan participants over to a risk-sharing system that has lower promises, but still retains a lifetime income aspect.


Spiotto had published a piece on Puerto Rico and its current financial difficulties just this past week.

Feb 22: Commentary: Just Wipe Out Public Debt! — Not a Solution for Puerto Rico or Anyone Else

However, there is one bill under discussion that should unite all of us in a determination that the proposed legislation should be buried once and for all. The U.S. House Natural Resources Committee held hearings on October 22nd and October 30th to consider a discussion draft bill that would allow the Puerto Rico Legislature and Governor to enact a resolution wiping out virtually all of Puerto Rico’s Public Debt – whatever remains unresolved of over $72 billion. This elimination of debt would be without justification or any pretense of due process. Even debt secured by a pledge of future tax revenues would be deemed unsecured and eliminated unless the creditor claiming a security interest could prove to a court in Puerto Rico that it is secured. However, pledges of future tax revenues to be collected after the date of the resolution would not be included in the calculation of secured status, thereby turning the principles of government finance on their head and frustrating the constitutional prohibition of taking property (security) without just compensation – a bankruptcy NO NO.

Not to mention: this would destroy the municipal bond market.

The blanket elimination of Public Debt of a government is unprecedented in the history of state and local government financing, which has an overall average annual default rate of approximately 1/50 of 1% going back as far as 1839. Unlike Puerto Rico, since the late 1800’s, no state has defaulted and not refinanced and paid in full its general obligation debt. Chapter 9, Municipal Debt Adjustment, is just that, an adjustment to that which is affordable, not a complete wipe out of unsecured debt. Recent examples of sovereign debt defaults are Greece, Brazil, Argentina, Ukraine and Ecuador. Between 1978-2010, there were 180 sovereign debt restructurings with a mean haircut of debt of only 37%. Even Detroit’s Chapter 9 had an average debt haircut of 38%.

Further, this drastic and unprecedented elimination of Public Debt will cast a fatal financial stigma on Puerto Rico with dire consequences, including dramatically increasing its future cost of borrowing – the opposite of what is desired.
Unprecedented debt cancellation would be another example of unsuccessful manipulation of economic forces. Investors will not put their money into something which almost guarantees a loss. Without legitimate investment, real financial recovery for Puerto Rico will never come.

What should Congress do? Certainly reject the bill to wipe out Public Debt. Congress must take the time to pass a legitimate, forward-looking plan supported by qualified financial experts to stimulate reinvestment in Puerto Rico, which can be used to encourage economic development, increase tax revenues and facilitate paying down the debt while reestablishing the island’s access to capital markets. Congress should enact a “Marshall “-like plan for Puerto Rico by investment and recovery, with over $91 billion of authorized Federal Disaster Aid over the next 20 years which now should be front-end loaded.
As this new year unfolds, we should hope for the Oversight Board, Puerto Rico and its creditors to negotiate a resolution that does not sacrifice the essential principles of municipal finance and together to join in the effort to have Congress pass legislation that remedies past inequities.
….. Congress has the constitutional mandate to accept the active guardianship role in decisions which will ultimately determine the fate of Puerto Rico and to be, for others, the good example for similar debt restructurings to come. This is not the time to let this ship run aground. Puerto Rico remains in troubled financial waters, and we need Congress now to do what it can do best and help steer the ship to a safe harbor that is hopefully the Rich Port.

I have not been writing about Congressional action much lately, and fiscal sanity has not really been a strong point in the Capitol for years.

But I do hope Congress listens to the last piece he wrote.


James left behind a wife, children, and grandchildren, and I’m sure he meant more to them in more ways. My experience with him, in reading his statements on Puerto Rico and other financially strained governments, was just a very small part of a full life.

But still, I do appreciate him for the contributions he made among the community of people looking to try to make public pensions sustainable. In the last published piece by Spiotto above, he argued for a more orderly bankruptcy proceeding for Puerto Rico, for the goal of having long-term economic growth prospects, which includes the ability to borrow in the future. The proposal to wipe out all of Puerto Rico’s debt is a very short-term “fix” that would destroy those long-term possibilities.

Similarly, unsustainable public pensions are constraining governments all over the U.S., and it is important to come up with an orderly way to handle this, and make sustainable promises, as I argued in The Moral Case for Pension Reform.

We lost an important voice for sustainable public finance yesterday with the death of James Spiotto.



I added this after CliffFiscalCT pointed out this video:

CT School Finance Project & the CT League of Women Voters Introduction to Public Pensions Forum

If that embed didn’t work, you can see the video at this link.


Chapman & Cutler: In Memoriam – Bankruptcy Lawyer and Municipal Finance Industry Icon, James E. Spiotto

Wirepoints: Trees in the Wind: R.I.P., Jim Spiotto – Wirepoints

Piece written by Spiotto in December 2014: Illinois Pension Reform Legislation Is Legally Justifiable and in the Best Interest of All

The Tree That Does Not Bend in the Wind Is Uprooted

The Illinois Pension Clause does not specifically state that pension obligations shall be paid under all circumstances even to the exclusion of the full funding of necessary services for the health, safety and welfare of the people. Reasonable adjustments to make pension benefits sustainable and affordable are not a diminishment or impairment, but rather are the recognition of reality of the limited revenues.

The failure to fund the necessary essential services and infrastructure would eventually lead to a loss of corporate and individual taxpayers that would result in less revenues to pay for workers, retirees and all concerned. The wisdom of the U.S. Supreme Court cases should reinforce the appropriate interpretation of the Illinois Pension Clause that unaffordable pension benefits whose funding would interfere with the appropriate funding of governmental services and infrastructure must be reasonably adjusted for the sake of all concerned.

Unfortunately, the Illinois Supreme Court did not listen to Spiotto.

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