City and town governments having serious financial difficulty in New York state will have their names released in the coming weeks by the state’s top financial watchdog, using a new monitoring system designed to avoid drastic measures such as bankruptcy or external oversight.

U.S. towns, cities and villages are struggling financially. Last week, a federal court deemed Stockton, California, fit for municipal bankruptcy. In Michigan, an emergency manager took over Detroit earlier this year.

Those are outcomes that New York Comptroller Thomas DiNapoli’s Fiscal Stress Monitoring System was designed to avoid. DiNapoli said the state so far has seen no local government bankruptcies despite the ravages of the financial crisis in 2007-2009.

“Setting the bankruptcy precedent in New York would send the wrong message to the municipal bond market,” said DiNapoli at a conference at the Rockefeller Institute of Government in the state capital Albany on Monday. “Such a step could make investors think twice about lending to other municipalities, especially those already suffering from severe fiscal stress.”

The first names of New York municipalities will be released towards the end of May, according to DiNapoli’s office. The system will also monitor school districts.

There could be around a dozen names in the “significant fiscal stress” category, according to a person familiar with the matter. The list could include the names of known problem municipalities such as the town of Long Beach in Long Island, or Rockland County as well as other municipalities whose fiscal problems are not widely known.

The system is designed as an early intervention mechanism with the Comptroller’s office offering technical assistance, training and planning to problem municipalities and school districts, DiNapoli’s office said.

(Reuters)