SEC recommends municipal security reform amid bankruptcies | Deseret News

The Securities and Exchange Commission called for structural improvements of the $3.7 trillion municipal securities market amid a recent uptick in city bankruptcies, according to a report released today.

“The municipal securities market is the bedrock for funding of local government projects throughout our country. It is essential that the market work well and that investors have confidence in it,” Mary L. Schapiro, chairman of the SEC, said in a statement. “While we have put in place measures to help investors make more knowledgeable decisions about municipal securities, we could do more for investors with statutory authority to improve disclosure and muni market practices.”

The recommendations grew from concerns raised by investors and others in public field hearings and meetings.

Despite it being a $3.7 trillion market, the municipal bond sector has been generally unregulated because of exemptions under federal securities laws, according to a statement from the SEC.

The report recommends better disclosures to investors, allowing the IRS to share information with the SEC and providing enforcement for continuing disclosure agreements and other obligations.

Recommendations from the SEC come as many cities in California default on debts.

California cities like Stockton, San Bernardino and Mammoth Lakes have all filed for bankruptcy this year.

Some experts are concerned that the increase in bankruptcy is a sign that insolvency for municipalities is losing it’s stigma.

“Do I expect more? Yeah, but I don’t expect a tidal wave,” Dick Larkin, director of credit analysis for Herbert J. Sims & Co. in Iselin, N.J., told Bloomberg. “I am starting to wonder whether or not the stigma of bankruptcy in California is going to be taken more lightly now.”

via SEC recommends municipal security reform amid bankruptcies | Deseret News.

Municipal bankruptcy: The lessons of California –

By Thomas Ferguson and Robert A. Johnson

July 31, 2012

In California, the names of the latest victims are well known. San Bernardino, Stockton and Mammoth Lakes all filed for bankruptcy within the last few weeks. And Vallejo emerged from Chapter 9 protection just last year. The questions appear to be “Why all in California?” and “Who will be next?”

Although California’s problems are extreme, the state is hardly alone in financial difficulties. Towns and counties in Alabama, Illinois, Michigan, New Jersey, New Hampshire, New York, Pennsylvania and Rhode Island are all having trouble meeting their financial obligations. If these conditions continue to spread, the United States will be facing a crippling debt crisis at the state and local levels, which is where Americans receive much of what matters for their quality of life.

This was a central point in a report released July 17 by the State Budget Crisis Task Force headed by former Federal Reserve Chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch.

Simply put, in the aftermath of the financial crisis emanating from Wall Street, the federal financial mess is bleeding over into state budgets in profound ways, adding enormous costs to already overburdened state coffers. That spillover, in conjunction with broader national crises in finance and healthcare, is overwhelming state and federal finances.

California has added challenges that make the problem even trickier. It must maintain massive education, infrastructure and prison programs with limited ability to raise money. The prison expenditures are particularly onerous. The state prison population is more than 160,000, and Sacramento spends roughly $50,000 annually to house each inmate. Not surprisingly, California has the costliest prison system in the country.

Despite the protests of powerful interest groups in the corrections business, California cannot afford to continue to crowd out other essential services to pay that group so handsomely. The state government must act now to overcome the prison interests’ lucrative campaign contributions to legislators — and outsize influence — and bring that sector back into line.

Additionally, local governments are limited in the amount of revenue they can raise by notoriously strict property tax caps set by Proposition 13. The state’s capacity to raise money also is hindered by its stagnant political system, which sets up the dynamic in which the only answers to an economic shock or shortfall are to vigorously restrict services or sell them off. Too many elements of California’s budget are protected by legislative decree or political muscle to allow balanced decisions in times of distress.

Taken together, California’s state and local governments are systemically set up to be financial disasters. That’s why California is an outlier nationally in the fiscal crunch and why it has become ground zero for municipal debt crises and bankruptcies. California is a prosperous state. It is the political constraints that are crippling it.

But other states, like New York and Illinois, should pay attention. If they don’t take action, the extremes of California will ultimately become a reality in those states too.

So what can be done? We can start by asking why the Federal Reserve cannot refinance municipalities to preserve essential services at interest rates comparable to what it gave to rescue the insolvent banks that created this mess. And it is high time officials moved boldly to force the banks to break off the chain of disastrous swap contracts that have cost local authorities and states so much money.

Another key point to keep in mind is the importance of strong regulatory policies. In a world in which financial institutions can receive zero-interest loans from the Federal Reserve and then lend out the capital at much higher interest rates, the opportunities for financial mischief are plentiful.

For years, bankers have used municipal bonds from California and elsewhere as playthings. Wall Street has consistently helped elected officials mask budgetary problems with complex derivatives that create the appearance of cash flow today by selling years of future revenue. The only purpose for these securities is to deceive the public and create fees for the financial firms.

Financial chicanery in these realms is demoralizing, harmful, expensive and dangerous. California experienced this type of treachery firsthand in the 1990s when Orange County declared bankruptcy after being sold highly risky securities by Merrill Lynch. That’s why it’s important to listen to the Vocker-Ravitch task force’s call for reforming budgetary systems in the states to make them accountable and transparent and expose financial scams to deter their widespread use. The people of California have a right to know how their fiscal accounts are managed.

via Municipal bankruptcy: The lessons of California –


Report: Municipal bankruptcy vs. Michigan’s emergency manager law

Storm clouds pass over downtown file photoDowntown Flint
As municipal bankruptcy is becoming more common, Michigan officials are comparing the process to the state’s revamped emergency manager law, known as Public Act 4.The law has been touted by Gov. Rick Snyder’s administration as providing an “early warning system” and tools to help cities in financial trouble avoid municipal bankruptcy.

Critics, on the other hand, say it undermines the democratic process by granting an unelected emergency manager broad authority to operate cities, including the power to change union contracts.

The mayor of Vallejo, Calif., which is the largest U.S. city to ever file and emerge from bankruptcy, told Advisor & Source Newspapers for a recent article that the experience is stressful and “demoralizing.”

“‘Bankruptcy makes you believe you have failed,’ said Vallejo, Calif. Mayor Osby Davis. ‘There is a stigma attached to the city in bankruptcy. It’s demoralizing … It’s a 24/7 stressor. It carries a long-term stigma, but I don’t think it’s a permanent stigma.'”

Officials said “fear of the unknown” is one of stigmas associated with bankruptcy. A judge would be in charge of bankruptcy proceedings, as opposed to a state-appointed manager.

Snyder has said he will deny any bankruptcy request from an emergency manager, according to the article. Any municipal bankruptcy would first have to be recommended by an emergency manager then approved by Snyder’s administration.

The cities of Flint, Benton Harbor, Ecorse and Pontiac and the school districts of Detroit, Muskegon Heights and Highland Park are all under state-appointed emergency managers.

For more on the story, view the article here.

Your Views, Aug. 1 | Breaking News | – Press-Enterprise

Jurupa Valley won’t fail

I’m the mayor of Jurupa Valley, and despite what your photo of me suggests, I’m not smiling about the “last resort” possibility of disincorporation (“Cities say they’re not going bankrupt,” July 21).

Jurupa Valley’s revenue loss, as well as that of Menifee, Wildomar and Eastvale, is far different from that of the cities claiming, or about to claim, bankruptcy.

As California’s newest city, Jurupa Valley has not made poor financial decisions, accumulated underfunded pension liabilities, or spent beyond our means.

Our revenues were wiped away by SB 89, which was signed into law just days before we incorporated on July 1, 2011. It diverted millions of dollars from motor vehicle license fees from cities formed after 2004 — in our case, we lost $6.7 million in our first year, or about 47 percent of our general fund. And the losses continue.

But bankruptcy is not an option and, in my opinion, neither is disincorporation. Jurupa Valley has no intention of failing. We are doing everything in our power to recover the revenues which were lost through no fault of our own.

Laura Roughton

Mayor of Jurupa Valley

via Your Views, Aug. 1 | Breaking News | – Press-Enterprise.

Don’t blame union for bankrupt cities –

There are more than 50,000 cities, counties and communities in the United States, and five of them have filed for bankruptcy protection. That’s right, five of them. Yet, the politicians and the news media backed by Wall Street would have you believe we are in the midst of an epidemic of bankruptcies. It’s simply not true. Yes, local governments across the country are having a very rough time, with the collapse of their revenue sources leading to unprecedented budget cuts, layoffs of public employees and give-backs on benefits negotiated in union contracts. But we aren’t in the middle of an epidemic of bankruptcies, despite the efforts of alarmists on Wall Street to gin up the public’s fears.

That’s not to suggest that everything is perfect. Far from it. We shouldn’t be surprised that some cities are near the breaking point, particularly when states and federal governments are providing no support. Early in the downturn, cities and counties were thrown a lifeline by the federal government, which provided billions of dollars to keep people working in education and other public sector jobs. With workers earning salaries, cities were collecting tax revenues. But with the election of a Tea Party majority in the U.S. House of Representatives two years ago, all hope of additional federal help vanished.

The myth of massive bankruptcies has a cousin, the big lie that public employees — and their salaries and benefits — are the culprit. That, too, is simply untrue. This month, The Wall Street Journal headlined their article on the potential of a sixth bankruptcy with this misleading headline: “Labor Costs Push San Bernardino Near Bankruptcy.” What is missing from that headline is the truth behind San Bernardino’s difficulties — a collapse of the housing market, the decline of tax revenues during the economic downturn, mismanagement by municipal officials and laws in California that severely limit local revenue options. San Bernardino, which has a jobless rate of 12.6%, was hit particularly hard by the recession and the real estate crisis. The assessed value of homes in that city dropped by nearly $2 billion in the past three years.

Some of the city’s problems might stem from incompetence or corruption. According to San Bernardino City Attorney James Penman, the city has misstated its financial reports in all but three of the past 16 years. Something other than labor costs is at play here. In fact, the salaries and benefits of safety officials, librarians, nurses and maintenance crews are rarely the cause of bankruptcy. For example, the bankruptcy filing of another California community, the small resort of Mammoth Lakes, was the result of a $43 million judgment won by a property developer in a suit against the town. More often, as was the case in Stockton, Calif., and in Central Falls, R.I., cities are facing serious financial burdens brought on by declining real estate values and high unemployment.

In other cities, bad investments and poorly thought out economic development deals have left taxpayers holding a mountain of debt. That was surely the case in Jefferson County, Ala. The county, with only 700,000 residents, owes more than $3 billion as a result of a toxic interest rate swap deal concocted by JP Morgan Chase and other investment banks to pay for a sewer overhaul. The banks bribed county officials and pocketed tens of millions of dollars in fees, while the people of the county now are left responsible for a debt that only benefited Wall Street bankers. Bonds and bribery were at the center of this financial disaster, not salaries and benefits for public employees.

Across the country, public employees are being blamed for an economic crisis they didn’t create. The problems cities and counties face are real. But scapegoating workers who make an average of less than $50,000 a year , and retire after a career of public service with a pension averaging less than $20,000 a year, is not the answer. Public employees are making sacrifices— such as salary cuts, benefit cuts and furlough days — to help their communities weather the storm. Rather than pointing fingers at those who keep our cities safe, educate our kids and make sure our air and water is safe, let’s pull together to find real solutions to fiscal problems facing our nation’s communities, cities and counties.

via Don’t blame union for bankrupt cities –

Poughkeepsie school board to decide on salaries | The Poughkeepsie Journal |

The Poughkeepsie School Board is poised this week to approve a new teacher salary contract, which officials say takes into account the financial difficulties city residents are facing.

“The needs of the community are being met,” school board President Ralph Coates said. “We are still looking out for the taxpayers and holding the line. I think the contract will be something everybody will be happy with.”

Debbie Kardas, president of the Poughkeepsie Public School Teachers’ Association, said Monday, “The district and I feel it is a fair document to all parties, including the community.”

Ken Stickle, 56, a lifelong resident of the City of Poughkeepsie, said teachers don’t deserve a raise based on Poughkeepsie High School having a graduation rate of under 60 percent.

“I think the teachers should not be getting a pay raise,” he said. “They should actually be giving money back until we see an improvement in the graduation rate and the kids start producing better grades.”

The most recent salary contract between the Poughkeepsie City School District and the teacher’s union expired more than two years ago on June 30, 2010. Board members say the uncertain economy was a key factor in prolonging the negotiations.

Kardas said an “overwhelming” number of the district’s 355 teachers voted last week to ratify the proposed salary contract.

District officials would not provide any details of the agreement, including salary increases, until the board votes to approve it. District Superintendent Laval Wilson said the salary pact takes into consideration the economic condition of the state, county and school district.

“I think we have all been mindful we have had a downturn in the economy,” he said. “The settlement is appropriate for the economic climate that we have been facing.”

Doug Nobiletti, 57, a self-employed city resident, said the teachers should take into account the fact that most people in the private sector are not getting a raise this year.

“I hope the contract will freeze raises, allowing us to hold the taxes and help all district residents equally,” he said.

The most recent contract with the Poughkeepsie Public School Teachers’ Association was a four-year agreement — July 1, 2006, to June 30, 2010 — that provided 3.75 percent annual salary increases.

However, teachers also receive increases in steps based on years of service and the degree they have. So a first-year teacher at step one in 2008-09 was making $47,168.

For 2009-10, that teacher’s salary would have increased to $52,587 at step two. That was a $5,419, or 11.49 percent, increase.

For a teacher at level 14 with a master’s degree in 2008-09, the salary was $80,705. In 2009-10, the teacher rising to level 15 would have received a salary of $86,741 — a $6,030, or 7.48 percent, increase.

Poughkeepsie teachers pay 5 percent of their health insurance premium, with the union’s medical trust fund paying 4 percent. The district covers the other 91 percent.

via Poughkeepsie school board to decide on salaries | The Poughkeepsie Journal |

Oregon Home Care Workers Ratify Union Contract · OPB News

More than 98 percent of Oregon home-care workers have voted to ratify a new union contract with the state.

For the first time, the contract covers 7500 caregivers who work with people with mental-health issues and developmental disabilities.

Rebecca Sandoval is a caregiver who was on the Service Employees International bargaining team.

She says workers agreed to a pay freeze. In exchange, the state kept their health-insurance plan.

“We were afraid that since home-care workers make so little money – we make $10.20 an hour – that if there were a premium-share, that people would just drop the insurance because they couldn’t afford it,” says Sandoval.

The union and the state have been negotiating the contract for more than a year.  It covers more than 18,000 workers.

via Oregon Home Care Workers Ratify Union Contract · OPB News.




Submitted by rkolodziejski on July 30, 2012 – 11:54am
With the election results in, counted and certified by MAPE’s Election Committee, MAPE members overwhelmingly accepted the 2011-2013 state contract. Over 90 percent of the voters accepted a contract that will offer them a 2% raise and steps for the hard work they do for their fellow Minnesotans. This is a fair contract that offers our members the ability to offset some cost of living and health care premium increases with well-deserved money in their pockets.

Now that our membership has ratified the contract, the Commissioner of Minnesota Management and Budget will sign and deliver it to the Legislative Subcommittee on Employee Relations. Once the Legislative Subcommittee on Employee Relations receives the contract, they will have thirty days to review and vote on it. Stay tuned to MAPE’s website and electronic newsletter to get the latest news on the next steps of the process.

Members Ratify State Contract | AFSCME Council 5

Ballots counted this morning show that AFSCME members have overwhelmingly ratified a two-year contract with the State of Minnesota, with 89 percent voting in favor of the agreement. The deal keeps health insurance affordable and it includes a 2 percent wage increase effective January 2, 2013, plus step increases both years. Now that union members have accepted the agreement, it must be approved or rejected by the legislative Subcommittee on Employee Relations, which is co-chaired by Senator Mike Parry (R-Waseca) and Representative Steve Drazkowski (R-Mazeppa). Please call your state representative and state senator today. Ask them to urge the Subcommittee on Employee Relations to approve this fair contract for hardworking state employees. To get your legislators’ number, call 651-296-2146 during business hours or visit the district finder.

Once approved by the legislature, the contract will cover more than 16,000 state employees in unit 2 (craft), unit 3 (service), unit 4 (health care), unit 6 (clerical) and unit 7 (technical). Unit 8 (corrections) and unit 25 (radio communications) continue to negotiate separate agreements.

via Members Ratify State Contract | AFSCME Council 5.