Our anti-tax, anti-government, union-busting, “my way or the highway” (but diminishing in numbers and voice so I shout louder) hard-right ideologues are placing all the blame on public pensions when it comes cities filing for bankruptcy. Please.
It doesn’t take a Ph.D. to figure out that the housing collapse and biggest economic bust since the Great Depression is a major factor when it comes to pro-development cities such as Stockton and San Bernardino filing for bankruptcy. The cities were overbuilt and in debt with projects when the “bubble burst.”
To be sure, costs (including public pensions) were a factor, but this was brought on by a steep and sudden dropoff in revenue.
And it’s definitely not a Nevada County problem as the local “the sky is falling” so my-candidate-can get-elected-not-yours ideologues seem to infer. (We recently did a “refi,” and the veteran housing market notary told us that local real estate agents were reporting a strong uptick in their business. In fact, some agents are reporting a record number of home sales this year, albeit at a lower median home cost.)
Marketwatch.com acknowledges the “revenue side” of city bankruptcies in a cogent analysis, but it also brings up the fallout from Prop. 13, a “sacred cow” to the hard-right ideologues, as a culprit. (The Jarvis Taxpayers Association is a friend to the hard right in the foothills).
“‘Bankruptcies are very rare,” said Jeffrey Esser, executive director of the Government Finance Officers Association in Chicago. “Three does not make a trend. But keep an eye on California and see if there are others.”
“He points out that this most-recent recession has been the strongest since the Great Depression, and thus the hardest hit ever for California cities under the 1978 landmark measure that slashed property taxes in the state, Proposition 13.
“’Proposition 13 put severe constraints on revenue,’ he said. ‘Yet the cost of running government continued to go up.’ (The cost of everything, not just government, continues to go up, I might add).
“His sentiments were echoed by Dick Larkin, senior vice president and director of credit analysis for Herbert J. Sims & Co. Larkin said in a note to clients Wednesday that he doesn’t see a wave of insolvency across the country.
“’I am worried, however, that this phenomenon may grow in California, which still feels the effects of 1978’s Proposition 13 that dramatically lowered property taxes,’ he wrote. ‘Were that to happen, bond issuers in the state (including the state itself, which plans a $10 billion note issue in a few weeks) may be painted with a ‘scarlet letter’ of ‘B’ for bankruptcy.”
I predict the next California cities that file for bankruptcy will be the ones hardest hit by the housing collapse.
The article is here.
I wonder if this grumpy group would be much happier in Oregon or Northern Nevada than California.
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