Vallejo City Manager Recommends Cities Not Seek Bankruptcy

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Vallejo City Manager Recommends Cities Not Seek Bankruptcy On Mar 26, 2013 03:12 pm Stockton, California, lays claim to a lot of undesirable superlatives: it’s America’s foreclosure capital, an annual contender on the Forbes “Most Miserable” list, and the United … Continue reading


Bankrupt Calif. city hires twice-bankrupt manager

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Bankrupt Calif. city hires twice-bankrupt manager Michael Winter, USA TODAY6:25p.m. EST February 22, 2013 Officials knew that experienced city manager owed $620,000 and lost his house in February 2011. (Photo: Via Press-Enterprise) Bankrupt San Bernardino, Calif., has hired a new … Continue reading

San Bernardino’s bankruptcy case becomes a battle of titans – San Bernardino County Sun

The battle lines have formed in San Bernardino’s effort to enter Chapter 9 bankruptcy protection.

On one side is CalPERS, the state’s public employee retirement system, which is the city’s biggest creditor and brooks no lapse in payments from its member agencies. CalPERS has challenged San Bernardino’s petition for bankruptcy protection and asked for a reversal of the stay that prevents lawsuits against the city until its bankruptcy case is decided.

On the other side is the broke city itself and an influential if unreliable ally: Wall Street, in the form of the city’s pension-obligation bondholders.

Those bondholders are investors who collectively own more than $50 million in debt the city issued in 2005 to fund its obligations to CalPERS. The city still owes $48.6 million on those pension-obligation bonds.

Attorneys for the bondholders filed a document with the court rebutting most of the points CalPERS and the San Bernardino Public Employee Association made in their objections to the city’s bankruptcy filing.

Some expert observers said they expect CalPERS’ attempt to sue San Bernardino for back payments to be rejected by U.S. Bankruptcy Court. But that’s just a skirmish in the overall war.

The real action revolves around Wall Street’s attack on the primacy of payments to CalPERS. Investors want the retirement system to be just one of the creditors like everyone else, not an entity that gets its money before the other

creditors fight over the remaining scraps.

See what has happened here? San Bernardino couldn’t afford to make its CalPERS payments as far back as seven years ago. Instead of making the fiscally sound decision to cut spending, city leaders borrowed $50.4 million so that the city could meet its pension payment obligations.

Financial firms were happy to sell those bonds to their customers, not worrying too much about the possibility that the city might not be able to pay them back – despite the ominous sign that San Bernardino was borrowing a huge sum in order to pay ongoing expenses.

CalPERS, meanwhile, saw no problem in the fact that one of its member agencies had to borrow tens of millions of dollars to keep making its pension payments. The pension system appears untroubled by its huge unfunded liability – officially $228 billion, higher according to some observers – and the fact that burgeoning pension payments are pushing more municipalities toward insolvency, so long as the money keeps coming in.

City employees were not bothered by the borrowing either, so long as their pensions kept growing.

For its part, the City Council was improvident enough to increase the pension-payout formula for safety employees in 2006 and for nonsafety employees in 2007 – after having to borrow tens of millions to pay for the existing pension plans, which clearly the city already could not afford.

It’s hard to find a hero to root for in this bunch.

San Bernardino’s bankruptcy effort is poised to become a battle of titans because – unlike Vallejo and Stockton – the city stopped making payments to CalPERS some $6.9 million ago. CalPERS claims primacy over all other creditors under California law, but Bankruptcy Court is federal. (Ask former medical marijuana provider Aaron Sandusky, who could get 10 years to life in federal prison next month for his conviction for peddling illegal drugs, about differences between state and federal law.)

Bond sellers and holders see this case as a showdown with CalPERS, in which they hope to do away with the retirement system’s payoff primacy and gain equal footing as creditors.

That leaves San Bernardino as a pawn in a much bigger game, where the major players are worried about the money they think is coming to them – and not really all that concerned about the city’s future.

via San Bernardino’s bankruptcy case becomes a battle of titans – San Bernardino County Sun.

Detroit bankruptcy would be long, painful, experts say | City of Detroit | Detroit Free Press |

Detroit’s seemingly intractable financial crisis is bringing to the fore talk about Detroit becoming America’s largest city to go bankrupt.

But Detroit filing for Chapter 9 municipal bankruptcy protection would be a drastic last option, one that would ignite a costly battle with lawyers representing creditors, city worker unions and retirees that could last for years, bankruptcy experts say.

Detroit could end up with legal bills in the hundreds of millions of dollars and far more cuts in its already-meager public services, meaning potentially fewer cops and firefighters and more city departments privatized or eliminated outright. Workers could be terminated, and those who stay would face deep pay and benefits cuts. A federal bankruptcy judge could allow the city — or the state, through an emergency financial manager — to rewrite labor contracts or toss them out altogether. The city could find itself proposing the sale of major city assets to pay down its enormous debts.  read more…

Detroit bankruptcy would be long, painful, experts say | City of Detroit | Detroit Free Press |

Bing says he knows bankruptcy, emergency manager possible for Detroit; ‘I haven’t given up’ | Metro Detroit | Detroit Free Press |

Dave Bing talks Detroit finance: Detroit Mayor Dave Bing, at a candid press conference on Friday, Dec. 7, 2012, talked about the city’s financial problems and steps he thinks should be taken to avoid bankruptcy or an emergency financial manager. BRIAN KAUFMAN/Detroit Free Press


via Bing says he knows bankruptcy, emergency manager possible for Detroit; ‘I haven’t given up’ | Metro Detroit | Detroit Free Press |

State laying groundwork for managed bankruptcy for Detroit | The Detroit News |

Under Public Act 72, an emergency financial manager cannot move to abandon the city’s financial workout plan in favor of bankruptcy until 180 days have passed. (Detroit News file)


via State laying groundwork for managed bankruptcy for Detroit | The Detroit News |

Shell-shocked Dems, labor unions promise retribution if Mich. right-to-work legislation passes |

Protesters against “Right To Work” legislation chant “this is what democracy looks like” as they take to the steps of the Capitol in Lansing, Michigan, Thursday, December 6, 2012.

LANSING, Mich. – With defeat in the Michigan Legislature virtually certain, Democrats and organized labor intend to make enactment of right-to-work laws as uncomfortable as possible for Gov. Rick Snyder and his Republican allies while laying the groundwork to seek payback at the polls.

Shell-shocked opponents of the laws spent the weekend mapping strategy for protests and acts of civil disobedience, while acknowledging the cold reality that Republican majorities in both the House and Senate cannot be stopped — or even delayed for long by parliamentary maneuvers. Leaders vowed to resist to the end, and then set their sights on winning control of the Legislature and defeating Snyder when he seeks re-election in 2014.

“They’ve awakened a sleeping giant,” United Auto Workers President Bob King told The Associated Press on Saturday at a Detroit-area union hall, where about 200 activists were attending a planning session. “Not just union members. A lot of regular citizens, non-union households, realize this is a negative thing.”

Right-to-work laws prohibit requiring employees to join a union or pay fees similar to union dues as a condition of employment. Supporters say it’s about freedom of association for workers and a better business climate. Critics contend the real intent is to bleed unions of money and bargaining power.

Hundreds of chanting, whistle-blowing demonstrators thronged the state Capitol last week as bills were introduced and approved hours later, without the usual committee hearings allowing for public comment. Even more protesters are expected Tuesday, when the two chambers may reconcile wording differences and send final versions to Snyder, who now pledges to sign them after saying repeatedly since his 2010 election the issue wasn’t “on my agenda.”

Republicans are betting any political damage will be short-lived. During a news conference with GOP leaders last week announcing their intent to press ahead with right-to-work measures, Snyder urged labor to accept the inevitable and focus on showing workers why union representation is in their best interest.

“Let’s move forward, let’s get a conclusion, let’s get an answer and get something done so we can move on to other important issues in our state,” he said.

On that point, at least, the governor won’t get his way. Unions and their Democratic allies say this means war.

Allowing employees to opt out of financially supporting unions while enjoying the same wages and benefits as members undermines the foundation of organized labor, they contend. A UAW bulletin described it as “the worst anti-worker legislation Michigan has ever seen.”

“You will forever remember the day when you thought you could conquer labor,” Sen. Coleman Young II, a Detroit Democrat and son of the city’s fiery late mayor, boomed during floor debate Thursday. “Be prepared to engage in the fight of your life.”

But for all the defiant rhetoric, the opposition faces tough odds.

State law forbids repealing spending bills through referendums, and Republicans made the right-to-work measures immune by attaching a $1 million appropriation. So the only apparent way to nullify the policy, once enacted, will be to seize statehouse control through the ballot box.

Even after losing five House seats in November, Republicans will retain majorities in both chambers for the next two years — during which time they expect voter attention to turn to other topics. They redrew district lines in their favor after the 2010 Census, boosting their long-term prospects.

Also, as Snyder noted, fewer than 20 percent of Michigan workers are union members. Organized labor rolls and influence have declined in recent years, emboldening Republicans to challenge unions even in their historic Rust Belt stronghold.

Wisconsin Gov. Scott Walker survived a recall attempt after curtailing collective bargaining for most public employees. After Indiana enacted a right-to-work law this year, voters in November gave Republicans a legislative majority so large they can conduct business without any Democrats present. Snyder and GOP lawmakers already had chipped away at Michigan union rights, even forbidding school districts from deducting dues from teachers’ paychecks.

Another problem for opponents: Right-to-work has considerable voter support. A statewide phone survey of 600 likely voters conducted in late November by the Lansing firm EPIC-MRA found 54 percent favored the idea while just 40 percent opposed it, although they were evenly divided when asked whether Michigan should become the 24th state with such laws. The margin of error was plus or minus 4 percentage points.

Senate Majority Floor Leader Arlan Meekhof, straining to be heard over jeering opponents in the chamber’s gallery, argued last week that by enacting right-to-work, “we are announcing to the world that we are moving Michigan forward. We are for workplace fairness and equality and we are for job cretion.”

To go up against all those obstacles, unions and Democrats will need solid organization, steadfastness and a persuasive case.

Democratic U.S. Rep. Sander Levin, who as a state legislator in the 1960s sponsored the labor law that right-to-work measures would overturn, called for a “massive education campaign” to remind voters of unions’ role in building the middle class and explain how the new policy will weaken their ability to bargain for good wages and benefits.

“What’s at stake is the cooperative, constructive labor-management relations that have ripened over the last 15 to 20 years,” Levin said. “This governor is essentially saying that instead of collaboration, it’s going to be dog-eat-dog.”

Michigan Education Association President Steve Cook said Republicans pushed the one issue guaranteed to unite an often fractious labor movement.

Activists have filed a lawsuit claiming the state Open Meetings Act was violated when police temporarily barred doors to the Capitol during last week’s debate. Other legal challenges are being considered, opponents said. Union members distributed leaflets Saturday at a college basketball game in the Upper Peninsula city of Marquette.

That’s only the beginning, Cook said. While declining to discuss specific plans, he vowed labor would fight hard to unseat right-to-work supporters in 2014 and might try to recall some legislators even earlier.

“Whoever votes for this,” Cook said, “is not going to have any peace for the next two years.”

Shell-shocked Dems, labor unions promise retribution if Mich. right-to-work legislation passes |