A Chapter 9 bankruptcy by the city of nearly 300,000 in California's Central Valley, about 85 miles east of San Francisco, could come as early as Wednesday.
Note - Stockton is less than 1/2 the size of Detroit, but it could provied a roadmap through the bankruptcy morass.
http://www.msnbc.msn.com/id/47975654...le-bankruptcy/
Stockton was considered the epicenter of the subprime mortgage crisis.
http://www.cbsnews.com/2100-18560_162-3752515.html
"...Most of the mortgages issued in Stockton, and half of those now in default or foreclosure, were something called subprime loans, meaning less than prime quality. The borrowers often had sketchy credit, were financially strapped or lacked sufficient income to qualify for a standard mortgage. After a year of artificially low payments, the interest rates on subprime loans jumped all the way to ten or 11 percent..."
I saw a piece on Stockton that was lumped together with a lot of the woes facing other cities. Hey, there's only so much money to go around, and when the money goes to the super-rich, that means that the average person [[that is, the person who pays taxes to pay for sewers, bond issues, police, fire, teachers, schools, etc.) doesn't have the money to fund a city properly. American cities are falling apart because the super-rich are hogging all the money and couldn't care less. They have theirs. What do they care about your sewer?
Excerpt from today's Wall Street Journal opinion page:
http://online.wsj.com/article/SB1000...n_AboveLEFTTop
"...According to city manager Bob Deis, bankruptcy is the only way to preserve a minimal level of services and public order. Stockton has the second highest violent crime rate in the state.
Even so, bankruptcy wasn't inevitable. A new state law mandates that municipalities engage in a three-month confidential mediation with creditors and unions before declaring bankruptcy. But Stockton's unions haven't acceded to the significant benefit changes needed to rationalize the city's fisc[al condition]. And creditors have resisted a reprise of the Chrysler bankruptcy in which investors got scalped while the unions walked.
Unions are blaming Wall Street and the foreclosure crisis for the city's woes. Like many other cities in California's inland regions, Stockton suffers from a high foreclosure rate, which has depressed property tax revenues and helped push the city's unemployment rate to 15%. The city of 290,000 also borrowed millions for projects that urban planners hoped would goose the economy and tax revenues—such as a $129 million waterfront development, a $68 million arena for minor league hockey, and a $35 million city hall that has since been repossessed.
Still, debt financing is not the city's main cost driver. That would be labor costs, specifically retirement benefits. The city has a little over $300 million in general-fund backed debt, but an $800 million unfunded liability for pensions and retiree health benefits.
The latter, which are not pre-funded, are expected to grow by 7.5% annually for the foreseeable future. Pension costs are about 40% of what the city pays on worker salaries and are also growing. The average firefighter costs the city about $157,000 a year in pay and benefits and can retire at age 50 with a pension equal to 90% of his highest year's salary plus nearly free lifetime health benefits...."
Retiring at age 50 at 90% of your highest salary plus "nearly free" lifetime healthcare benefits sounds too good to be true or sustainable. Is this comparable to DFD pension benefits?
This is the problem in cities, counties, states and school districts all over the country. Past practices are simply unsustainable. The same practices in private industry have been largely eliminated by inherently competitive market forces consisting of a combination of concessions, bankruptcies and a general shift in business from less competitive, higher-cost, inflexible firms to more competitive, lower-cost, more nimble firms.Quote:
Originally Posted by Packman41
The same will eventually happen in the most insulated sectors of the economy -- government and education. This is just the beginning, and there will be no stopping the trend. It's inevitable because the status quo is inherently unsustainable, the only question is how quickly or slowly it will occur.
From the MSNBC piece:
Quote:
Stockton officials have said since February their city's finances are suffering the combined effects of fiscal mismanagement over two decades, too much debt taken on in good times and generous pay and unsustainable benefits for city employees and retirees.
And those costs WOULD be sustainable if the big money hadn't broken the back of labor and driven down pay, eviscerating the middle class AND that middle class' ability to fund a municipal middle class.Quote:
Originally Posted by Det_ard
In other words, labor isn't the problem. Shit rolls downhill. And the problem is the rich shitting all over us. And laughing at us for blaming a continuing middle class of public sector workers as the cause of our problems.
That trickle has become browner over time hasn't it?
You said it, brother!
Municipal pension and healthcare costs are problematic all across the globe. It's stunning that you'd find a bogeyman instead -- the "rich man" is at fault. He took all the money from us. Otherwise we could all be high-paid union workers. Simpleton economics.Quote:
Originally Posted by Detroitnerd
Leave economic issues to the big boys who actually understand them. Do a music or dive bar review or something instead.
Economists, especially those who are corporate lickspittles, love to say that normal people don't understand economics. Or else why would we need economists?Quote:
Originally Posted by Det_ard
Bad times are ahead for economic "experts" though, because the majority of the people in this country are already all-too-well aware that the rich have manipulated the rules to effectively steal money and entrench their power. They will not be prosecuted by the government they bought and paid for. So somebody else has to be blamed. And since "economists" cannot blame the super-wealthy, they have to use the "shit rolls downhill" maxim and go after the next enemies of capital, those perpetual "bogeymen," the unions, which allow workers to wrest economic power away from the elite. But not everyone's buying this.
In fact, according to reliable polls across the board, everybody knows that the rich are "stealing" from the poor.
And the last people to know it, or even admit it, will be the economic "experts." :)