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!
The recovery plan for the OC bankruptcy as approved by the federal bankruptcy court provided for making all creditors whole – they did not lose a dime. That includes both secured and unsecured creditors. Included in the unsecured creditor category were county employees and retirees. So, anyone who thinks the OC bankruptcy proces was a way to avoid contractual commitments to employees and retirees had better think again. The county employees that did lose out were the 800 or so that were actually laid off due to bankruptcy driven budget cuts Those employees lost their jobs, but if they were retirement age they did not lose their retirement.
I also wonder about the poster child for municipal bankruptcy these days – Vallejo. Last I heard the federal bankruptcy court was not convinced the city was justified in seeking bankruptcy. Anyone have an update on this?
*Been around a while…..
Since you seem to grasp the complexities of “The OC” Chapter 9 filing…you might remind us about the various School Districts, Water Districts and others that thought “the good Citron” had the magic bullets to make them and theirs mega-bucks!
Well, my take on those non-county entities that invested in the Citron Casino (otherwise known as the County Treasurer’s Investment Pool) was that they were (perhaps understandably) chasing high returns. When the whole investment pool became insolvent, the Board of Supervisors could have taken the position that everyone who had money in the pool must bear their proportionate share of the loss. San Diego County did this shortly after OC went bankrupt and thus bankrutcy filing in San Diego County did not occur. But the OC Board either did not have the guts or there was some legal reason I do not know about that prompted the Orange County Board to make the other entities that were in the investment pool whole. Thus, the entire fiscal burden fell on the county budget/treasury, and bonds were floated to cover the approx. $ 1.8 Billion loss with the county, not all the investors in the pool, paying off the bonds over time – like 20 years or more.
(An observation is that if the county was not paying $70 million or more a year interest on these bonds, year in and year out, perhaps our esteemed Board of Supervisors could have fully funded its retirement plan for county employees with this same money.)
There are still some who believe to this day that had the OC Board of Supervisors had the fortitude to tell the other public entities who had money in the investment pool that they must take their share of the loss, a bankrputcy filing would not have been necessary. That is my take on it – I was not intimately involved but close enough to believe this is the real lay of the land. Perhaps there are others reading this blog that know differently?