First Vallejo, then Stockton, then Mammoth Lakes,
and now San Bernardino and soon possibly 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 debt—are
becoming insolvent.
Not that the state’s legislators have anything constructive to offer. California’s Democratic leaders are not only unwilling to rein in the costs of benefits for their patrons, the public-sector unions, but they have been erecting roadblocks to those localities that want to fix the problem on their own. Yet all the political blockades in the world cannot fix the basic problem of insolvency.
Stockton negotiated the new process created by a state law requiring a 60-day period of negotiations before filing for Chapter 9 bankruptcy. That period is over and the city—a hard-pressed port on the edge of the California Delta—has become the largest city in the country to pursue municipal bankruptcy. The cause was a pension system eating up 30 percent of the budget, an absurdly generous retiree medical program, and excess bond debt for pension obligations and redevelopment projects.
Soon after, Mammoth Lakes decided to pursue bankruptcy. That city’s problem came after it lost a judgment in a development case. Although not tied to public-employee compensation, the situation was caused by city officials who prefer to play developer than tend to the nuts-and-bolts of city government—a long-term problem in that eastern Sierra vacation town. In 1996, Mammoth Lakes lost a court case after it declared its downtown area blighted because of excess urbanization, in a ruling the judge said exemplified the misuse of redevelopment power.
Read more: http://reason.com/archives/2012/07/20/california-goes-bankrupt
Not that the state’s legislators have anything constructive to offer. California’s Democratic leaders are not only unwilling to rein in the costs of benefits for their patrons, the public-sector unions, but they have been erecting roadblocks to those localities that want to fix the problem on their own. Yet all the political blockades in the world cannot fix the basic problem of insolvency.
Stockton negotiated the new process created by a state law requiring a 60-day period of negotiations before filing for Chapter 9 bankruptcy. That period is over and the city—a hard-pressed port on the edge of the California Delta—has become the largest city in the country to pursue municipal bankruptcy. The cause was a pension system eating up 30 percent of the budget, an absurdly generous retiree medical program, and excess bond debt for pension obligations and redevelopment projects.
Soon after, Mammoth Lakes decided to pursue bankruptcy. That city’s problem came after it lost a judgment in a development case. Although not tied to public-employee compensation, the situation was caused by city officials who prefer to play developer than tend to the nuts-and-bolts of city government—a long-term problem in that eastern Sierra vacation town. In 1996, Mammoth Lakes lost a court case after it declared its downtown area blighted because of excess urbanization, in a ruling the judge said exemplified the misuse of redevelopment power.
Read more: http://reason.com/archives/2012/07/20/california-goes-bankrupt
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