The city of 28,000, located among dairies and almond groves about 100 miles (160 kilometers) southeast of San Francisco, declared the emergency yesterday as a US$3.3-million deficit may leave it out of cash before year-end, according to budget documents. Officials, who want concessions from public-employee unions, told almost a quarter of municipal employees they’ll lose their jobs as Atwater tries to balance its budget.
Source: financialpost.com
Video: Municipal Bankruptcy: Unacceptable and Unpatriotic….for Bondholders
California Chapter 9: Next Up, City of Atwater?
(1) is a municipality; (2) is specifically authorized, in its capacity as a municipality or by name, to be a debtor under such chapter by State law, or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor under such chapter; (3) is insolvent; (4) desires to effect a plan to adjust such debts; and (5)(A) has obtained the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under such chapter; (B) has negotiated in good faith with creditors and has failed to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under such chapter; (C) is unable to negotiate with creditors because such negotiation is impracticable; or (D) reasonably believes that a creditor may attempt to obtain a transfer that is avoidable under section 547 of this title.
Source: weil.com
Moody’s: Municipal Bankruptcy Is Becoming A Popular Strategy In California
“Every city in the state is looking on with some concern,” said Dave Vossbrink, spokesman for the city of San Jose. “Governments of all kinds borrow money, usually to build infrastructure that lasts a long time. It’s like getting a mortgage to build roads, a sewage plant, whatever it might be. If the investment community perceives greater risk, you may not be able to borrow as much for public purposes.”
Source: businessinsider.com
How American Cities deal With Bankruptcy
Like a majority of other bankrupt municipalities, San Bernardino’s public services account for the majority of its budget—73 percent of the general fund goes toward public safety. The city also claimed that the largest employers are local government agencies.
Source: businessinsider.com
ATWATER IS NEXT CALIFORNIA MUNICIPAL BANKRUPTCY
Even with all this pain and suffering, Atwater’s city tax revenue fell by only 20% since its peak in 2007. Atwater did reduce its bloated union payroll from 120 to 80 since 2008, but mostly through attrition and laying-off low paid younger workers. To keep the lights on the city depleted its cash reserves. But union wages have been allowed to continue to rise and the city agreed to pay all general employees’ portion of mandatory pension contribution and all but 2% mandatory pension contribution for highly paid police and firefighters. The city also continued to pick up most of the cost of health-care premiums that rose by 15% this year and are scheduled to rise 10% next year.
Source: chrissstreetandcompany.com
State leaders: Michigan voters risk bankrupt cities with vote on managers
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Source: crainsdetroit.com
California publishes a municipal bankruptcy guide
I think this is an excellent report, but I imagine it was intended for members of the California legislature as much as city officials coping with distressed finances. There are swarms of bankruptcy attorneys circling weak municipalities, willing and able to establish an hourly relationship and give advice. But California legislators have a lot of constituencies to placate, and every muni bankruptcy affects public unions and their retirees. Public unions have long been a powerful force in Sacramento. Bloomberg reported that public unions contributed $76 million to California politicians and ballot measures in 2010, the single largest interest group that year.
Source: reuters.com
California municipal bankruptcies threaten public pensions
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Source: ivn.us
The Scary Future of Municipal Bankruptcy
Additionally, local governments are limited in the amount of revenue they can raise by notoriously strict property tax caps set by Proposition 13. The state’s capacity to raise money also is hindered by its stagnant political system, which sets up the dynamic in which the only answers to an economic shock or shortfall are to vigorously restrict services or sell them off. Too many elements of California’s budget are protected by legislative decree or political muscle to allow balanced decisions in times of distress.
Source: alternet.org
Fiscal Stress, Not Municipal Bankruptcy, Is the Issue
Although some in the media claim that municipal bankruptcy is becoming a trend, the data don’t support it. The trends that data show are that housing foreclosures, declining tax bases, and declining state pass-through revenues have negatively impacted the fiscal condition of some local governments. Local governments have also suffered from a lower rate of return on the investments that fund retiree pensions. Most local governments that face these fiscal stresses find they can manage their difficulties with conservative management and budgeting practices.
Source: icma.org