Friday, June 4, 2010

California may bar city bankruptcies

By Aaron Smith, staff writer

NEW YORK ( -- A bill that clamps down on municipal bankruptcy filings is headed for Gov. Schwarzenegger's desk, which is bad news for Los Angeles and other cash-strapped California cities.

It the governor signs Assembly Bill 155, it would place a hurdle in the path of filing for Chapter 9 municipal bankruptcy. The bill stipulates that a city may only file for bankruptcy with the approval of the California Debt Investment Advisory Commission, which provides information on debt to public agencies.

"California's taxpayers who rely on public safety, senior, park and library services, as well as those who own and operate businesses in our communities, deserve every effort that state and local government can make to avoid the long-term devastation of bankruptcy," the bill says.

In particular, the bill says it intends to protect retirement pensions and health benefits for public employees, which would be disrupted and renegotiated in the wake of bankruptcy.

This could have a direct impact on the state's largest city, Los Angeles, which is facing a huge budget shortfall.


Submitted by Jim Alex


Kathy Meeh said...

Good update post Jim. How is the Legislature going to solve these city financial stress problems? Here's more talk about bankruptcies among CA cities, with an ending comment "If you don't have the bankruptcy outlet, what do you do? If you can't pay your bills what do you do?" Reuters 5-27-10 .

Pacifica, Tribune 6/2/10, "My Turn" Column, Cynthia Kaufman, PhD philosophy, is proposing the same solution as presented by our city council: tax Pacificans. Guess "Tax Pacificans" is the alternative City Council 8 year failure plan, while they refused to accept "smart development" tax revenue producing opportunities.

Maybe, we already pay enough taxes and fees and give way too much to this city. Here's some examples of the taxes and fees we do pay: property tax, school tax, several utilities taxes, library and other municipality taxes, embedded city franchise fees (example trash, Comcast), regressive sales and use taxes (now 9.25%), payroll taxes-- and Federal and State Taxes.

We live in a city with marginal services, failing infrastructure, and one of the highest tax rates in the United States-- I think we don't need more taxes, we need solutions. "Our environment is our economy" does not translate to tax revenue generated within Pacifica, because much of our "economy" is spent outside Pacifica.

Anonymous said...

The City is asking for the employees to take cuts first or did you forget that. $8 million in cuts to be exact. In all this anti-tax talk the employees who have been cut and cut again are being asked for more cuts. You can talk about no taxes, but until we get our new efforts at economic development off the ground (which is what at least one council member is working on) what do you propose?

Lionel Emde said...

"The City is asking for the employees to take cuts first or did you forget that. $8 million in cuts to be exact."

Actually the city manager is claiming that there will be $8.5 million in "savings" over the next five years by renegotiating employee contracts.
I'll believe that when I see it.

As a first step, all existing contracts will not be "revisited". That's bureaucratese for reopening and renegotiating existing contracts.

I don't think the people are going to support more parcel taxes, bond issues, etc., until we see some structural changes that give some sustainability to our fiscal future. It's happening in many other places and it'd better start happening here.