San Bernadino declares Bankruptcy

[snafu]

What happens to residents when their municipality declares itself to be bankrupt? Do municipal workers carry on as usual? Have their pensions been protected? Are important services like police and firefighters cut back? Is a Receiver appointed to collect municipal taxes, licenses and fees for service to pay debt? How are roads and bridges inspected and repaired?

Isn't this alarming? How can elected representatives be so irresponsible as to approve spending without funds to support their decisions? Will residents be required to pay a 'special assessment' of some type to balance the municipal budget? Is a Receiver appointed to correct problems? Will creditors merely recover pennies on sums owed?

[bjl584]

I know that a lot, or at least a big part, of what's going on around the country was due to the housing crisis. All those now vacant homes mean no more property taxes. The governments never bothered to decrease their budgets accordingly, and as a result they started running major deficits. I'm not really sure what happens at the local level as far as public workers and pensions. Or if it will be business as usual for the time being at public offices.

[elessar78]

There was an article in vanity fair about Schwarzeneggar's time as gov of Califohnia, in which he said that Californians REALLY want their public services BUT are unwilling to pay for any of it. Nothing new, except that blaming elected officials isn't the answer—they are merely reflecting what the electorate wants and it's driven their town/city/state into the ground.

[JoeP]

Municipalities are in a tough position.

For one, they are responsible for the creation and maintenance of infrastructure that is the foundation for the region. For example, would it make sense to cut the sewer workforce in half, allow certain lines or equipment to fail, and then spend even more to fix them afterward (not to mention deal with the poor publicity)?

It is hard to ignore the fact that taxpayers continue to pay into pensions and benefits, while the workforce retires relative early and continues to live longer every year. I don't see this trend changing.

[elessar78]

Municipalities are in a tough position.

For one, they are responsible for the creation and maintenance of infrastructure that is the foundation for the region. For example, would it make sense to cut the sewer workforce in half, allow certain lines or equipment to fail, and then spend even more to fix them afterward (not to mention deal with the poor publicity)?

It is hard to ignore the fact that taxpayers continue to pay into pensions and benefits, while the workforce retires relative early and continues to live longer every year. I don't see this trend changing.

The same Vanity Fair article said that municipal budgets are being crippled by police and fire pensions to a large degree.

[JoeP]

The same Vanity Fair article said that municipal budgets are being crippled by police and fire pensions to a large degree.

Again, tough position. Do you cut back on the existing workforce (in number and/or compensation) and put the public in potential danger and jeopardize infrastructure, in order to honor obligations made to retirees? Sounds like some of the options on the table include both.

[elessar78]

I'm not making a value judgment with my posts, at least not intending to, but illustrating the tough position local officials are in. Yes, it's a difficult call on where you draw the line and sometimes the line can't be drawn without hardship.

I was talking with one of our own local officials here and he made a poignant comment: "When it comes to local politics, affiliation or idealogy doesn't really matter. A pot hole doesn't care if you're republican or democrat."

[zenne0105]

At one time, municipalities sold bonds to fund public works projects. These investments were safe, because elected officials did not want to risk defaulting on voters. However, their very safeness led insurance companies to cover them against default for small premiums.

[elessar78]

The flip side to the bond issue is that at the "birth" of a community it's great, there's a huge tax base. But as the community ages and newer surrounding areas are built, and it's happened a lot in California particularly, that tax base moves out. So once infrastructure starts going, 20-25 years down the road, the money isn't there to upgrade so you get situations where towns/cities just can't afford to "exist".