Walking a municipal tightrope to avoid city bankruptcy
.... "Warnings from 8 cities -An
additional eight California cities, including Fairfield, which declared a
fiscal emergency in April, have officially notified the municipal bond
market this year that they are facing significant financial hardship,
according to Matt Fabian, managing director of Municipal Market Advisors, which conducts independent research on the municipal bond industry. The notifications don't necessarily mean these cities are headed for bankruptcy court, but they do signal real adversity.
with Fairfield, the other cities include Arvin (Kern County), El Monte
(Los Angeles County), Grover Beach (San Luis Obispo County), Lancaster
(Los Angeles County), Monrovia (Los Angeles County), Riverbank
(Stanislaus County) and Tehachapi (Kern County).
.... Cities' common traits - Stockton
and San Bernardino share three characteristics that could help people
better forecast which cities might be in danger of heading to
bankruptcy, said McKenzie of the League of California Cities. Those
include cities with tax revenue severely affected by the mortgage
crisis, cities that are older and have a significant amount of deferred
maintenance, and cities that are unable to persuade public employee
unions to agree to deep cuts in salaries and benefits."San Francisco Chronicle/Wyatt Buchanan, 7/14/12, "Red flags over cities bankruptcy filings."Read Article.
"Only about 20 percent, or 43, of the Chapter 9 cases filed
in the U.S. since 1981 were by towns, cities or counties. Of
those, California, Alabama and Texas led the way, accounting for
more than two-fifths of such filings, according to a Bloomberg
News review of court filings. ..... All three allow cities and special tax districts to file
bankruptcy with few, if any, conditions. While California
requires cities to first go through mediation with creditors, a
loophole lets officials declare an emergency to shorten, or even
eliminate, the talks. Bloomberg/Steven Church, 7/16/12, "Nebraska, not California is king of municipal collapse." Read Article.
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