So What’s a Chapter 9 Again?

Lindsay Vonn, Shani Davis and Shaun White all scored Gold Medals in the Vancover 2010 Winter Games yesterday!  The hype was big.  The thrill of victory and agony of defeat concept was targeted with theatrical perfection.  Congratulations to everyone on Team USA!

OK, in the meantime, Government and Business numbers are up and appear to be hopeful.  Maybe, a few more jobs, maybe more manufacturing hiring, maybe a light at the end of the tunnel?  Then comes the reality that foreclosures are still going to be coming, especially for Commercial real estate…..and in many cases those that have recently bought residential.  The jury is still out and it may be the middle of next year to see any clarity regarding National and Regional Real Estate pricing. 

The Euro is dropping like a stone….so what does that mean?  Are they in fact selling their debt to the Chinese as well?  In the meantime, businesses are trying to raise prices on goods and services in the middle of an economic funk and waggle!  Some are sustaining, while others are seemingly just falling off the trash trucks.  That leaves States, Counties and Cities in the middle of a whirlpool of falling revenues.  The 3 at 50 Pensions start to kick in, Bureaucratic inefficiency begins to raise its specter, Government, Teachers and Associated Government Service providers are requiring drastic cuts to make mandatory annual budgets.  Even places like Los Angeles are looking at major lay-offs of thousands of city employees.  Welcome, to Chapter Nine, which soon could become an epidemic throughout the country.

The Wall Street Journal reported today that places like Harrisburg, PA, Vallejo,California, San Diego, California, Las Vegas, Nevada (Las Vegas Monorail Co.) and Sierra Kings Health District in Reedley, California are all facing Bankruptcy issues which may require the infamous 1994 Orange County solution:  Chapter 9!  This is of course the last resort – when municipal entities cannot pay their bills.  What is interesting is that the 1934 Law requires that each State grant approval to the Municpality to reorganize that debt.

Raising taxes winds up causing the Detroit Syndrome – and is just not a viable option!  People just leave town!  So, each Municipality tries to sell off available assets, cut the size and scope of Government and delay payments, hopefully until better days.  The 1994 Orange County Bankruptcy of $1.6 Billion dollars is still being paid off…..we believe.  So, what to do?  Many are simply disallowing Pension and Retirement Agreements that they made with various employee groups.  The law suits are going to be horrendous, costly and non conducive to good employee relations. 

How many communities are going to fall this year?  How many relocated workers and families are going to be affected?  How long will this house of cards built on excessive worker benefits last? As a side note:  AIG is keeping its $500 Billion Dollar Portfolio of “Complex Derivatives” ….because they don’t want to  take the major hit of unloading them at 10 to 25% on the dollar.  How many Municipalities, Employee Groups and Businesses are still engaged in this “risky behavior”?  Welcome to famous “The OC” Chapter 9, where all your nightmares can soon become reality!


About Ron & Anna Winship

Independent News Producers/Writers and Directors for Parker-Longbow Productions. Independent Programming which includes a broad variety of Political, Entertainment and Professional Personalities. Cutting Edge - a talk show...is the flagship of over 30 URL websites developed or under development. The Winships have been blogging for the Orange Juice since back when nickels had buffalos on them, and men wore onions attached to their belts, because it was the fashion back then.