(1) People sue city government for failures and incompetence

(2) The people win lawsuit and are given settlement out of their own taxes
(3) how is that not a catch-22 ?

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they should change policy that government workers who knowingly and willingly break the law. or violate the constitution pay for their legal defenses out their own damn pockets and not the cities tax coffers.
and make their own damn insurance company pay up..

which is the way it prolly was once upon a time. but these snakes get together and fix the system for themselves...