Municipal bonds have long been among the safest investments, but a coming wave of municipal bankruptcies in California – and the disturbing way one of those cities is stiffing its bondholders – could change perceptions about the wisdom of lending money to cities. The struggling port city of Stockton has declared bankruptcy after a spending...
Without a doubt Syracuse, New York is headed for bankruptcy. Not only is there an “official denial” but the mayor of Syracuse is seeking legal guidance on municipal bankruptcy. Once again, public union wages and benefits, especially police and firefighters’ pensions are smack in the midst of it. Please consider this news headline which I...
Does this seem incredible? Well it isn’t. It is based on actual payroll records obtained from the city of San Jose for 2011, with just one assumption added – that pension funds will no longer earn 7.5% per year, but instead earn a more realistic 4.5% per year. If you want to stick with 7.5%,...
Space does not permit a complete discussion of zombified cities. Such a list would be in the many hundreds. Rather this post is about four cities in recent news that are among the walking dead. One is even a dumping ground for the dead. <strong>Fourth Financial Urgency in Miami in Four years</strong> The <em>Huffington Post</em>...
Fearing action by creditors, San Bernardino, California, Files Chapter 9 Bankruptcy Petition San Bernardino, California, after disclosing a $46 million shortfall in the city’s budget, filed for municipal bankruptcy. San Bernardino listed assets and debt of more than $1 billion in a filing yesterday with the U.S. Bankruptcy Court in Riverside, California. It’s the third...
In a welcome, common sense ruling, Court lets Stockton, Calif. cut retiree health care A federal bankruptcy judge on Friday cleared the way for Stockton, California to cut health care benefits for retirees while it is in bankruptcy proceedings. Stockton is seeking Chapter 9 protection from its creditors and said that it would cut retiree...
First, Vallejo, in 2008. Next, Stockton, then Mammoth Lakes and, now, San Bernardino and soon, perhaps, Compton. As Orange County Supervisor John Moorlach told Bloomberg News, the bankruptcy dominoes are starting to fall. One California city after another – following a decade-long spree of ramping up public-employee pay and pension benefits, as well as redevelopment...
Editors Note: It remains an article of faith among public sector union defenders of defined benefit pensions – as they are – that “the market’s just taken a little beating,” and “the long-term outlook does not merit a crisis mentality.” Even pension fund managers, such as City of San Jose’s Police and Fire Retirement Plan...
When you see headlines like this: San Bernardino, California, Weighs Chapter 9 Bankruptcy, you know 100% without a doubt the city is bankrupt, and the only question pertains to the filing. From the Bloomberg headline story …. San Bernardino may become the third California city in two weeks to file for municipal bankruptcy protection, as...
First Vallejo, then Stockton, then Mammoth Lakes and now San Bernardino. As Orange County Supervisor John Moorlach told Bloomberg News, the bankruptcy dominoes are starting to fall. One California city after another — following a decade-long spree of ramping up public-employee pay and pension benefits, as well as redevelopment debt — are becoming insolvent. Not...
Still unappreciated among defenders of public employee pension benefits is the extreme sensitivity of projected rates of return on investments to the amount government payroll departments have to fork over to the pension fund managers every year. Equally unappreciated is the possibility, if not certainty, that the rates of return currently being used by pension...
Scranton, Pennsylvania’s, the state’s sixth-most-populous city (population of 76,089 in 2010 census), is down to its last $5,000 and has no way to pay salaries. The mayor wants an immediate tax hike of 29% and 78% over three years. In every sense of the word, Scranton is bankrupt. NPR reports Scranton’s Public Workers Now Paid...
Headed into the 2010-11 school year, one could have easily assumed that the Los Angeles Unified School District had no money to waste. The district’s budget deficit stood at $640 million. More than 2,000 employees had just been laid off. The school board had just approved a deal giving teachers five unpaid furlough days, and...
The city of Stockton, California, is Bankrupt. It has stopped making bond payments and will become the largest city in the US to seek protection via US bankruptcy law. The bankruptcy was inevitable. California law requires blame to be assessed. To be sure there is plenty of blame to go around. Here are a few...