Thursday, May 24, 2012

Vallejo, Calif., once bankrupt, is now a model for cities in an age of austerity


By , Published: May 23

VALLEJO, CALIF. — The first couple of years were ugly. After this working-class port city became the largest in America to declare bankruptcy in 2008, crime and prostitution surged as the police force was thinned by 40 percent. Firehouses were shuttered, and funding for libraries and senior centers was slashed. Foreclosures multiplied and home prices plummeted.

But then this city of 116,000 began to reinvent itself. It started using technology to fill personnel gaps, rallying residents to volunteer to provide public services and offering local voters the chance to decide how money would be spent — in return for an increase in the sales tax. For the first time in five years, the city expects to have enough money to do such things as fill potholes, clear weeds, trim trees and repair tennis courts.

The nation’s cities are weak links in the U.S. economy and, if they collapse in large numbers, it could knock the country’s recovery off course. Cuts at the federal level are being pushed down to the states, which in turn are passing the problems to their cities.

The strains are especially great in California, which was at the epicenter of the housing market meltdown and the deep recession that followed. Even before revenue slowed, the state was facing unique constraints on public finances because its laws make it difficult to raise taxes.

The dire conditions, however, have made California a laboratory for how to run cities in an age of austerity.
Declaring bankruptcy used to be a last resort for cities, not only because it would cripple their ability to borrow for years to come but because of the blow to their reputation. But that attitude has started to change as more cities have found themselves facing fiscal catastrophe; bankruptcy offers an opportunity to start over with a clean slate.

At least three California cities — Stockton, Mammoth Lakes and Montebello — have declared that they are exploring the option. And at least 100 of the state’s 482 cities are on track to face a similar predicament by the end of the year, according to Barbara O’Connor, a professor at California State University at Sacramento.

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Submitted by Lionel Emde

10 comments:

Anonymous said...

It's not the end of the world. If handled intelligently, and that's a big if, Chapter 9 or even AB506 could be the fresh start this town needs. Of course we'll probably be borrowing to make the city payroll before anyone takes action. Then we'll need to hire a consultant or three, then, yeah.

todd bray said...

Fortunately AB506 comes before a Chapter 9 bankruptcy. It allows for all the necessary employee compensation and benefit/pension restructuring without the needless negative impact to the city's bond rating a Chapter declaration would have.

The city has already declared a fiscal emergency so we are in a good place to start an AB 506 process.

Unfortunately our council is relying on a self interested senior staff and city attorney that don't want to upset their gravy train apple cart.

I laugh now every time I hear "union contracts" as an excuse for inaction. AB506 helps to restructure those through a regulated process.

Anonymous said...

The other component of AB506 states that there must be a "neutral evaluation process" regarding the City's debts and obligations.Only creditors who have or may have a claims exceeding $5,000,000 or who's claim exceeds 5% of the CIty's debt qualify as "creditors" in the process. Also, many times pension funds are considered untouchable. Do you really think Pacifica is even near this situation? We have land to sell, can transfer the police department to the County Sheriff, use that building for City Hall and sell the property City Hall is now on. Pre-Development has begun at the old waste water treatment plant and unions seem to be working within the City structure to keep their employees working.

Anonymous said...

Anon@724 makes some important points. This city should be able to take steps such as those mentioned by anon and get out of this mess. Unfortunately, Todd also makes a valid point and the odds are against us because of that on-going failure of Pacifica leadership, both political and professional. So-called leaders who can't or won't make decisions are irrelevant and should be replaced. We'll probably posture, pose, and dither our way into a good old Chapter 9 with all the trimmings. What a distinction!

Anonymous said...

Still trying to get my mind around Todd's "gravy train apple cart". The visuals are a little weird/yucky. Guess that's what passes for public transit in Pacifica.

todd bray said...

Try this:

Seven people on a life boat with supplies for five.

Do you throw two people off the boat like our current senior staffers, department heads, fire and police are doing or do you ration the supplies so everyone can stay on the boat?

By taking a 1% pay cut for every $10,000 earned our municipal employees can save all their coworkers jobs. Instead we are seeing people get "thrown off the boat" so the most expensive least productive of our employees, senior staff, department heads, fire and police can retain their current life style at the expense of every single Pacifican.

Anonymous said...

Please Todd, tell me you'll save Ginger and Gilligan, ok?

Hutch said...

We are negotiating four union contracts as we speak. I hope to God our negotiators are pushing big cuts. But we as citizens are kept in the dark about all of it.

Anonymous said...

Yeah, I don't remember giving them a blank check, but they act like they have one. It's like some secret society we pay for but can't know much about.

Hutch said...

Well some of the problem is laws that prevent the city from discussing negotiations in public while allowing the unions to say anything they like.

Public unions have had too much unfair advantage for too many years. Things that apply to us don't apply to them. That needs to change and probably will as more cities go bankrupt and pension plans collapse. Public union pensions, benefits and wages need to be more inline with what most taxpayers get. No more retiring at 55 with 90% of your pay.