LITTLE ROCK — The acting mayor of Gould, the Lincoln County community that recently exited Chapter 9 bankruptcy protection, is working on a new contingency plan to settle $900,000 in debt.
Acting Mayor Earnest Nash, the city’s elected treasurer, said he doesn’t know yet how the city will settle debts with its creditors.
“We’re going to try to cross as many of those bridges as we come to them,” Nash said.
“We’re not going to do like past administrations and run from the debt, or hide from the debt. We’re going to try, as best to our ability, to face those problems head on.”
Municipal bankruptcies are rare, said James Spiotto, a Chicago lawyer who tracks local governments that have filed for Chapter 9 bankruptcy protection. There are only about three dozen cities, towns and counties nationwide that have sought shelter in bankruptcy since 1980.
Gould is the second municipality in Arkansas that has filed for bankruptcy since 1980. The other was the Hempstead County town of Ozan, population about 80, in 1995. That town’s bankruptcy was also dismissed, meaning the court never approved a plan for the town to pay its creditors.
Gould owes about $224,282 to the Internal Revenue Service, $200,212 to United States Department of Agriculture Rural Development and $317,895 to the Arkansas Department of Natural Resources, according to its bankruptcy filing.
Bankruptcy attorney James Dowden said the city has had an agreement with the IRS for the past several years to pay $500 a month on its $224,282 debt plus any new payroll taxes.
Nash said the city is now working with the IRS on a new plan to see if the city can settle its debt for an amount much lower than it owes. That plan, if approved by the IRS and the city, would likely require the city to pay as much as 20 percent of the settlement amount as a down payment and pay the rest of the amount within 10 months, Nash has said.
Dowden said the debts to the USDA and the Arkansas Department of Natural Resources belong to the city’s water department, which has been paying them in monthly installments.
The city originally filed for bankruptcy April 21, 2008, for the purpose to “forestall several lawsuits pending against the city of Gould,” Dowden said in the motion.
In January, Dowden said Gould didn’t have enough revenue to organize a plan under the Chapter 9 bankruptcy to pay off all its creditors, and thus the bankruptcy had to be dismissed.
In a motion to dismiss the bankruptcy, Dowden said the city appears to be “back on its feet financially, and the need for a Chapter 9 reorganization no longer exists.”
U.S. Bankruptcy Judge Richard Taylor approved dismissal of the bankruptcy May 28.
Nash said he went to Washington, D.C., last month and met with U.S. Rep. Mike Ross, D-Prescott, and representatives in the offices of Democratic U.S. Sens. Blanche Lincoln and Mark Pryor to discuss an economic plan to increase revenue and job creation in the city.
“We’re going to do what we can to make the economic plan work,” Nash said.
“We can create jobs in our community. We may not have a factory that hires 100 or 200 people - I’m not saying we’re going to get an H.P. like Conway or a car factory like other areas - but there are opportunities here.”
Nash said the city will not be able to settle all its debts at once and that he will ask the debtors to be patient.
“If they’ll work with us, we’ll work with them,” Nash said.
“The consensus of the City Council is we’re not going to run from our debts. We’re going to handle them as they come along.”
Arkansas, Pages 11 on 07/21/2010