HB 1166 — Receivership: Distressed Cities Recovery Process

This bill originally started as a housing measure that would have limited local zoning authority for very small homes (400 square feet or less), but it was replaced with new language in the Senate State and Local Government Operations Committee.

As revised, the bill creates a structured process to help cities that are struggling financially or not meeting basic requirements like passing a budget, holding elections, or providing core services. A city may be considered “distressed” if it shows ongoing financial or operational issues, such as missed payments, unpaid employees, or budget failures.

The process begins when a local delegation raise concerns and a review commission evaluates the city. If issues are confirmed, the Attorney General can petition the court, which may appoint a receiver for up to two years to develop and carry out a recovery plan focused on stabilizing finances, maintaining services, and addressing obligations.

The receiver operates under court oversight with defined authority and regular reporting requirements, with the goal of returning the city to stable operations.