Remember when Meredith Whitney was ridiculed by Wall Street when she stated that munis would default. It looks like she got the timing wrong and maybe the total size but it I think she may ultimately be vindicated. Since August of 2011, three cities in California, one in Rhode Island, one in Pennsylvania (the Capital), and one county in Alabama have all filed for bankruptcy protection with debts exceeding $4.5 billion. Between 1981 and 2011 we only had 36 governments seek protection. Sounds like the defaults are speeding up but only time will tell.
California cities from the Mexican border to San Francisco Bay are confronting rising pension costs as they contend with growing unemployment and declining property- and sales-tax revenue. The costs stem from decisions made when stock markets were soaring and retirement funds were running surpluses.
San Bernardino officials sped up the timing of the bankruptcy filing because they were concerned that some creditors may take legal action against the city, Mayor Patrick J. Morris said yesterday in a phone interview. Under Chapter 9, all court cases and other legal actions against the city will be halted until the bankruptcy case is over.
“All of our vital service bills will continue to be paid,” Morris said. “We are going to keep our city services running.”
San Bernardino, a city of 209,000 about 60 miles (97 kilometers) east of Los Angeles, listed assets and debt of more than $1 billion in a filing yesterday with the U.S. Bankruptcy Court in Riverside, California.
Pension LiabilitiesPension liabilities in the California cities of Fairfield, Inglewood, Pomona, San Bernardino, Stockton and Vallejo rose 6 percent to $4.3 billion for the year ending June 30, 2010, from $4.1 billion in 2009, according to the most recent data available from the California Public Employees’ Retirement System.
In the northern California municipality of Fairfield, near the Napa Valley winegrowing region, 18 percent of the general-fund budget goes toward pension costs, up from 14 percent in fiscal 2008, said David White, the deputy city manager.
Fairfield, Inglewood, Pomona and other California municipalities including Compton are on a list of cities “on the precipice” compiled by Matt Fabian, a managing director for Concord, Massachusetts-based Municipal Market Advisors, who cited news reports in identifying them in a July 23 research note.
San Bernardino has reduced its workforce by 20 percent in the past four years and negotiated labor cuts valued at about $10 million annually, according to a June 26 budget analysis posted on its website.
San Bernardino, California, Files Chapter 9 Bankruptcy