BEATRICE, Neb. — It started with a murder, was followed by a botched trial and has ended with a small Nebraska county facing a $30 million judgment it can’t possibly pay.
Now the farmers and small-town residents of Gage County are on the brink of a rare public bankruptcy, and wondering about possibly selling off the county’s road equipment, public buildings and few other assets to pay down the debt.
“It’s just devastating,” said Darrell Fletcher, who owns a carpet store in the county seat of Beatrice. “It’s going to affect the whole area — businesses, farmers, you name it.”
The county’s problems stem from the rape and killing of Helen Wilson, 68, in 1985 and the conviction months later of three men and three women who spent decades in prison before DNA evidence exonerated them and implicated an Oklahoma man who died in 1992. Those wrongly convicted filed a federal lawsuit claiming that investigators recklessly worked to close the case despite contradictory evidence, and in July, a federal jury awarded them $28.1 million, plus additional money for legal fees.
Unless the verdict is tossed out on appeal, which experts say is unlikely, the county will be ordered to immediately pay the $30 million.
That’s a mind-boggling prospect in a rural county of 22,000 residents that collects $8 million in taxes a year. The county, on the Kansas border and about a 90-minute drive from Omaha, is mostly cropland.
Bankruptcy is “definitely an option on the table,” said Myron Dorn, the county board’s chairman, but it’s not clear how that would work.
Only a handful of cities and counties have sought bankruptcy protection in the nation’s history. The biggest was Detroit, in 2013. Bankruptcy is normally out of the question for cities and counties because, theoretically, public jurisdictions can raise taxes to pay off their debts.
But Nebraska’s constitution limits how much revenue can be raised from property taxes, and Gage County could raise only about $3 million more before hitting the legal limit. Although residents could vote to go higher, chances of approval are slim in a place where the median household income is about $35,000 and farmers are struggling with low commodity prices. Don Schuller, a 61-year-old farmer, said paying off the judgment in one year would cause the county portion of his tax bill to quadruple.
Said Dorn: “I think for a lot of people in Gage County, the unknown is the part that’s giving them the most stress. We get all kinds of questions about what’s going to happen. And, well, we just don’t know yet.”
When Detroit faced bankruptcy, it had valuable assets like the art in the city’s art museum, although private donations helped avert a sale of masterpieces.
In Gage County, the assets consist mostly of the courthouse, bridges and roads.
“You need those things to keep the county functioning,” said Larry Dix, executive director of the Nebraska Association of County Officials.
Attorney General Doug Peterson has rejected the idea of a state loan, and the county’s insurance companies say the judgment isn’t covered.
“I just hate the thought of them holding the citizens accountable for that money,” said Nick Jurgens, who owns a computer repair shop on Beatrice’s main drag. “It wasn’t really any of our faults.”
But Jeffry Patterson, who litigated the case for the wrongly accused, said the county has to find a way to pay up.
“Some of our clients are not in good health, and I’d really like to see them reap some benefit,” he said.
One of the six died in a factory accident in 2011. Patterson declined to make the others available for an interview, saying they want to be left alone.
If Gage County files for Chapter 9 bankruptcy, it will follow the path taken by Jefferson County, Ala., in 2011. Jefferson County had to lay off employees, close a hospital and sell a nursing home, among other assets, to defray a $4.2 billion debt.
Gage County has little to sell.
“Wow,” said David Carrington, a commissioner in Jefferson County. “They’re in a real mess.”