sunset from behind the wire

sunset from behind the wire

Sunday, March 24, 2013

Chapter 9 Bankruptcy: Stockton, California

It's a trend that began with Orange County, California, continued with the City of San Bernardino and will not end there. The City of Stockton is headed for Federal Bankruptcy Court to seek protection under Chapter 9.

We spent like the good times would go on forever,"
said Stockton spokeswoman Connie Cochrane.



The sad truth is that cities, counties and states need to balance their budgets. President Obama said last week that he had no particular interest in balancing the US Budget. The US is able to continue to print money as if it stole it. But that's not Stockton's story.
Fox News analyzed it this way: "It was like refinancing your house and dumping the proceeds into the Wall Street market and hoping your earnings go up faster than the interest rate on your loan," 
By 2009, the city began slashing its budget to stay afloat. The police department lost 25 percent of its 441 sworn officers and the fire department was cut by 30 percent. City staff was cut by 40 percent. The city general fund budget, now $155 million, has been cut by $90 million over three years. 
The impacts were felt everywhere. Wells Fargo bank seized three parking garages when the city defaulted on the $32 million in bonds that financed them. Bond holders also seized the $40 million downtown high rise that was to become City Hall. 
Stockton recorded its highest-ever number of murders in 2011 and 2012, and had three just last Sunday. Last year, an FBI analysis of violent crime made it the 10th most dangerous city in the U.S. Its unemployment rate is 17.5 percent, and it has the third-highest illiteracy rate in the country.
Stockton is not unique by any means and I expect that we will see increasing numbers of municipal bankruptcies as cities and counties are not able to pay their bills. Cook County, Illinois and the City of Chicago could be close on Stockton's heels. 

Voters don't seem to get it, and that's why Barack Obama was elected to four more years as US President. Socialism ends when you run out of other people's money to spend on votes and goodies.

On December 6, 1994, the County of Orange filed for Chapter 9 bankruptcy protection. County officials believed this action was necessary because of market losses to the Orange County Investment Pool (OCIP) estimated at the time to exceed $2,500,000,000.  
Due to a favorable selling environment, the actual losses were later tabulated at about $1,500,000,000. The OCIP had been leveraged to $21 billion dollars.  
Subsequently, the Orange County (CA) District Attorney’s Office opened an investigation to determine criminal culpability. The scope of the investigation was designed to examine whether or not a crime(s) occurred in connection with events that culminated with the bankruptcy filing.  
 This publication is a historical account of the largest municipal bankruptcy (at date of this publication) in the history of the United States of America.
Yes it's a shameless plug for one of my books but I ran this investigation so I do know a bit about municipal bankruptcy and about the matter of cause and effect in this regard. The book is a dry read and discusses in detail how and why. $4.99 on Kindle.


Irresponsibility by government leaders has consequences.

Spending it as if you stole it has consequences.

We've become a nation drunk on other people's money and the symptoms are everywhere.

9 comments:

  1. It's as though these people think they have a "right" to free money. They either don't think about, or don't care, where funds for welfare and public programs comes from. NOTHING is for free, and a lot of people here and in Europe refuse to understand that.

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    Replies
    1. They are more focused on their "free" ObamaPhone or their free lunch than on what keeps the wheels moving. And when there is no more free lunch, they move elsewhere, in much the same way as parasites drop off a dead host and go looking for fresher blood.

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  2. LL, give me your money, so I can enjoy myself tonight.

    ReplyDelete
    Replies
    1. Sorry. Day late/dollar short. It already went to Barack and Michelle.

      Delete
  3. And as bad as it is... any solution you propose must be absolutely painless and unnoticeable or it will be deemed draconian and rejected.

    ReplyDelete
    Replies
    1. The only solution is pain. And I think that Stockton understands that now. They have to give the control over the city to the court because they made a series of bad decisions.

      The US would be bankrupt if they weren't printing money.

      Delete
  4. Good points LL, and sadly OPM is now running out! And the people are paying the price while the guilty get off scott free (and with their pensions)...

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    Replies
    1. FERS will have to rely on the Federal reserve printing more paper. You can't trust government with control of any pension system. They're less trustworthy than the Teamsters...and that's saying a lot.

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  5. When local California official Susan Muranishi retires from her job in a couple of years, she’s going to be walking away with a fat paycheck -- $423,664 a year – for the rest of her life.

    Muranishi, an Alameda County administrator, makes $301,000 in annual base pay. But in addition to that, the San Francisco Chronicle reports she'll also receive:
    *$24,000 in “equity pay” to make sure she makes at least 10 percent more than anyone else in the county, even in retirement.
    *An annual performance bonus of $24,000, even in retirement.
    *Another $9,000 a year for serving on the county’s three-member Surplus Property Authority, even in retirement.
    *$54,000 a year in “longevity” pay for having stayed with the county for more than 30 years, even in retirement.
    *Like other county executives, she’ll also get an $8,292-a-year car allowance. According to the county auditor's office, her pension would be equal to her annual pay package now.

    Read more: http://www.foxnews.com/politics/2013/03/26/alameda-county-administrator-to-get-423644-year-after-retirement/#ixzz2Of0yp0bx

    ReplyDelete

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