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Subscribe to RSSA fiscal emergency is considered the first step towards Chapter 9, said CNBC's Jane Wells, reporting on whether Atwater, California will become the fourth town to declare bankruptcy in the state.
Municipal bankruptcies are spreading like a “disease” in California, one public finance expert warned Wednesday as the city of Atwater declared a fiscal emergency with a budget gap of more than $3 million.
The city’s council approved the move on Wednesday night, putting it on the path to becoming the fourth city in the state to declare bankruptcy this year.
With a population of 28,000, Atwater fell on hard times after its housing market imploded and sent property tax revenue plummeting. Furloughs and a hiring freeze had not been able to stem Atwater's losses.
San Bernardino becomes 3rd Calif. city in 2 weeks to file for bankruptcy protection
Municipal debt market analysts are keeping a close eye on the finances of local governments in California out of concern that some could use fiscal emergency declarations as a way to speed Chapter 9 filings to attempt to shed financial obligations.
"In California, we have a disease, and the disease is spreading," David Kotok, chief investment officer at Florida-based Cumberland Advisors, told the State & Municipal Finance Conference conference in New York on Wednesday, according to the San Francisco Chronicle.
"I suspect we're going to see wholesale warnings and downgrades" among bond rating issuers in the state, he said.
If it went bankrupt, Atwater would follow Stockton, San Bernardino and Mammoth Lakes by making a Chapter 9 filing.
San Bernardino, California's city council in July authorized a bankruptcy filing after declaring a fiscal emergency. The city of 210,000 residents 65 miles east of Los Angeles, filed for bankruptcy on August 1.
By contrast, Stockton, a city of 300,000 located about 62 miles to the northwest of Atwater, became California's first city to file for Chapter 9 bankruptcy protection this year after 90 days of inconclusive mediation with its creditors.
Kim Rueben of the Tax Policy Center explains why some American cities are running out of money, filing for bankruptcy, and making drastic cuts in the process.
Mammoth Lakes, a resort town of about 8,000 residents in California's Sierra Nevada mountains, followed Stockton into bankruptcy court, saying it could not afford a $43 million legal judgment against it. Mammoth Lakes has since reached a settlement with the property developer in the legal dispute and later this month will seek to have its bankruptcy case dismissed.
City officials in Atwater are looking into options for increasing revenue such as raising 20-year-old rates for water services and 10-year-old rates for garbage collection services while clamping down on costs, all while considering whether to pursue a bankruptcy filing.
Union representative Nancy Vinson said 38 of Atwater's non-safety employees have received layoff notices and that 12 are sure to lose their jobs as part of the city's efforts to pare spending.
Vinson told Reuters by telephone that she believes Atwater's financial troubles are so severe that the city will not be able to avoid a bankruptcy filing.
"I believe they're heading straight to bankruptcy," she said.
Mayor Joan Faul could not be reached by Reuters for comment.
Reuters contributed to this report.
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Why don't they set up more welfare lines for illegals instead of paying their bills.
When you have 1/4 of the population NOT paying taxes but using all the same services as the people who do the system can not survive.
Highest percentage of illegals in America as well as the most over compensated State union employees. This is the natural end result of Obama's policies and exactly what the Democratiuc party has planned for the rest of America.
Four more years, four more years, oops, that is one of the many reasons California is in the mess it is in. Most states that are run by the democrates are "feeling" you pain, you must get rid of them, but that is next to impossible. Also, because of this, there are becoming more "takers' in California than "makers". That's the main reason I left Califonia in 2010. Where I now live, taxes are lower, gasoline is 25-30 cents a gallon less, my electric bill for a 6000 sg ft house was $175 last month ( we use that "dirty" ole coal to produce electricity) I don't pay state income taxes and my vote will count in the November election! Life is good outside California!
Remember, if you voted for Obama in 2008 because he is balck and you wanted to prove that you were not a racist, then vote for Romney in 2012 to prove that you are not an IDIOT!
Its definitely the Government of California's problem, which by the way will get a lot worse as they cannot sustain the train they are riding and it will crash in the dessert.
Those who can afford to leave have or are going to, leaving less tax revenue and increasing the red hole they are in compounding the problem at a faster speed by the day.
Those who cant afford to leave will be sucked dry of everything they own and then will be forced to leave.
The Government will shutter and I for one living in another state that is fiscally responsible do not want to pay for a state that has zero control. You made your bed lie in it.
The "Disease" is Liberalism....
I'm helping as much as I can. When I talk to a druggie or an illegal, I tell them how great California is. How they can get a drivers licence, and lots of welfare. I let them know about the sanctuary cities. and how easy it is to get a medical marijuana card.
I tell them, "the streets of California are paved with gold".
Pensions before potholes. What else is new?
Fixing pensions before fixing potholes. Nothing new!
I was thinking: (damn that's hard). If California would just build their welfare office ON the border, they could bring in the money in on the north side and pass it out on the south side. That way illegals could stay home and still get paid.
CA used to be the golden state, jobs were plentiful, companies were coming in bringing jobs, providing income for homeowners; so the revenue base was plentiful. So much optimisim that everyone wrote themselves platinum pension bennies and provided magnanimus social bennies - now with jobs not so plentiful, so many coming across our southern border fleeing a country where the government does not provide for their citizens like this country does and so with the resulting congestion so many are fleeing east. Companies and all those jobs (and the homeowners) are doing likewise. So the revenue base continues to shrink, yet the payouts continue. The "Big One" may be a blessing in disguise. I just hope it happens after I flee east.
Voters have the memory of a hummingbird. They forgot why Gray Davis was run out of office then elect another Gray Davis (Jerry Brown) who proved to be fiscally inept during his previous term in office. The Immoral Majority out there got what they deserved. Too bad that sensible people have to go down with them!
It's hard to believe that they didn't see this coming and make the proper adjustments to keep this from happening..It seems to be easier to just let things get out of control and then yell for help..Some great leaders in this town..if there is no money...make the necessary and painful adjustments...Is it really that hard to figure out
California has a disease all right. It's a cancer on the state disguised as Democrat Liberalism in the governor's office, the State Assembly, and the State Senate. The policies instituted by these liberal bastards are killing business in the state, driving pensions out of sight because of union extortion and protection by Democrats. Can't wait for the whole state to collapse because that is the only way we will rid ourselves of the rats in Sacramento and cities.
California stupidity knows no end. Look at who California puts into office, Pelosi, is the best example of out of control politics.
California deserves what they get, just keep those illegals comfortable as they take, take, and take more, with no accountability and repayment.
CA should start by getting rid of nancy p. and then taking a good hard look at the rest of the democrats who always seem eager to spend money that doesnt exist on social programs that are worthless, the bad thing is if all the libs start moving from CA they will be coming to a neighborhood near you
all one needs to do is look to the former ussr and all questions about why the peoples republic of kalifornia is going broke are answered .
Tip of the iceberg. I mean how in the world can a city keep running while paying out retirement. I watched a story on the news about a firefighter in California who retired at age 52, with a 90,000. a year pension! I mean he is young-52 but receiving a pension of $90,000.??
Come on. Then you hear of all the double and triple dipper's and it just makes me sick.
I can see why cities are forced to go bankrupt even trying to pay these kinds of outrageous pensions.
I personally think the politicians and union officials that came up with these outrageous plans shoulf be looked up...see where they are and ask them how we are supposed to possibly sustain this legacy.
Outrageous.
Pelosi's Democrats have made a mess out of California. Maybe the rest of the country can start buying beach property on the cheap. Give them $1 per acre and tell the Californians to go to Mexico and work with the Cartels who supply them drugs. People and businesses are leaving the state. Boxer and Pelosi are the top Democrats of one of the most fiscally messed up states in the union. The only competition is llinois - Obama's state. Figures!
The government monkees are destroying our cities with their bloated "entitlements". Few in the private sector get their benefits or their lavish overpay. They should just be grateful that they have a job. Put them all on Social Security and minimum wage, that will solve the problem.
"City officials in Atwater are looking into options for increasing revenue such as raising 20-year-old rates for water services and 10-year-old rates for garbage collection services"....
Hey guys, that alone will NOT save your town from taking on water. Now, if you were really SERIOUS about saving your city, maybe these measures could make a difference instead:
Reducing benefits for current employees, while phasing out the LIFETIME nipple on the tit of gov't also.
Streamlining gov't by reducing WASTE both at the local and state levels...
Cut pension and pay for ELECTED OFFICIALS...
Sounds difficult I know. But it CAN be done, it just depends on how much the "loyal public servants" want to save their town....
OR...you could always ask Nobama for a bailout!!!
Just saying...
GO ROMNEY 2012!!!!
I have a suggestion, NoAssistance to illegals, No bilingual programs, no welfare without work, and FIRE the politicans who Can't seem to do their JOBS!
Yup....ain't democracy great....the peole get what they deserve.
And.....as if things couldn't get worse....gas prices are heading toward $5/gal in the Golden State. How's that working out for you in your bankrupt cities? Cost of running those cop cars just went up....citizens: not so much, you guys get to just stay home and pay taxes....but don't worry, the multi-billion dollar high-speed-train to nowhere is doing just fine (if a little late....)
What a joke CA has turned into......
We're still not finished with the fallout of the housing bust...
The problem with socialism is that eventually you run out of other people's money to spend. Then you must declare bankruptcy and spend within your means.