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Thread: California achieves another 'first'

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    Default California achieves another 'first'

    (snip)"The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.

    Vallejo may run out of cash as early as March, council member Stephanie Gomes said.

    "Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."

    Gomes said the situation has been building for more than a decade.

    "This has been happening for quite a while. For 15 years the city council has been putting Band-Aids on the problem. (It has been) extending contracts and deferring payments for public safety to the next years as a way of balancing the current budget."

    Public safety contracts for police and fire services make up 80 percent of the city's general fund.

    "We've been spending more than we've been making for 20 years and it's time to pay the piper," Gomes said."(snip)

    (snip)"In a report to the City Council dated Feb. 13, Vallejo Finance Director Rob Stout projected that without deep cuts, including assumed agreements negotiated with police and fire departments by June 30, the City will be $6 million in debt and will have spent every last penny of its $4 million in reserves.

    Gomes said the city has a plan to cut $20 million out of the budget in the next year.

    That emergency spending plan could devastate city services. The police and fire unions must agree on the spending cuts before it can be considered.

    The Feb. 26 city council meeting takes place the same day the City Council plans to vote on the plan.

    In a report to the City Council last week, City Manager Joseph Tanner said the city faces a $10.1 million general fund operating deficit for the current fiscal year and a negative available fund balance of $5.9 million on June 30, 2008.

    "Based upon the updated financial projections, the current estimate for insolvency is late April 2008," Tanner said. "It may become necessary for staff to recommend that the City Council consider filing and pursuing Chapter 9 bankruptcy in the event the city is unable to meet its existing obligations with its existing revenues," Tanner said in the report.

    The city currently has a $135 million liability for the present value of retiree benefits already earned by active and retired employees and an additional $6 million a year as employees continue to vest and earn this future benefit, Tanner said.

    Gomes said she and Schivley wanted the meeting to be held Tuesday night at City Hall but one of the council members pulled the item from the agenda.

    "We felt it was important to do it anyway so the public could hear and have a discourse on the budget," Gomes said.

    Emergency Plan Would Hit Hard

    The plan calls for cutting city salaries to 5 percent lower than June 30, 2007 starting on March 28. Police and firefighter salaries under the existing labor agreements would be reduced 15 percent, by 8 percent for the electrical workers and 5 percent for confidential, management and un-represented employees.

    Thirty general fund positions would be eliminated, 16 of which are currently filled and will require layoffs. Other vacant positions could be filled by transferring employees but the reductions would reduce the general fund positions from 494 to 411, or by 17 percent."(snip)

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    Default Re: California achieves another 'first'

    Vallejo is scary. I say this is the first one in a string of many.
    you live like an ivy vine
    you can only survive by clinging onto trees
    that's your flaw
    put down some roots so you can stand on your own
    -Kenpachi



  3. #3
    BrunetteGoddess
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    Default Re: California achieves another 'first'

    Uh, yeah. If my car ever broke down there, I think I'd hide in the trunk. Scary place.

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    Veteran Member firekitten19's Avatar
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    Default Re: California achieves another 'first'

    Didn't the city of Irvine go bankrupt a few years ago? I heard something about that when I was overseas.
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    Default Re: California achieves another 'first'

    I say this is the first one in a string of many.
    I suspect that you are right. And it won't just be in California.

    The failed muni bond auctions of the past few weeks, and the much greater scrutiny in regard to creditworthiness of both the bond issuers and the bond insurers, are making the past practice of cities selling muni bonds paying very low interest rates to 'paper over' their current budget deficits a lot more difficult and/or expensive.

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Melonie View Post
    I suspect that you are right. And it won't just be in California.

    The failed muni bond auctions of the past few weeks, and the much greater scrutiny in regard to creditworthiness of both the bond issuers and the bond insurers, are making the past practice of cities selling muni bonds paying very low interest rates to 'paper over' their current budget deficits a lot more difficult and/or expensive.
    Last October, and earlier this month, there have been radio ads which offer California muni bonds to those of us who are "average folks." The sales pitch is individuals who aren't very, very wealthy will be allowed to purchase shares of state muni bonds before institutional investors. Sorry, but any such offer of an "investment" which is offered to "average people" before the institutional investors doesn't pass the "smell test" as being a good investment!

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    Jay Zeno
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    Default Re: California achieves another 'first'

    Quote Originally Posted by firekitten19 View Post
    Didn't the city of Irvine go bankrupt a few years ago? I heard something about that when I was overseas.
    Irvine is in Orange County, I believe, and Orange County filed bankruptcy following an embezzlement scandal. If I remember right. No sure thing.

    Over a huindred Chapter 9's (municipal bankruptcy) have been filed by local governmental entities since 1980.

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Jay Zeno View Post
    Over a huindred Chapter 9's (municipal bankruptcy) have been filed by local governmental entities since 1980.
    You mean this happens to others besides those crazy liberal Californians??? Tell me it can't be so?

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    Banned Eric Stoner's Avatar
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    Default Re: California achieves another 'first'

    A recent fiscal analysis of California points out that HALF of its current deficit is from wealthy Californians leaving. Tired of paying high taxes they relocated to Nevada; Arizona and Idaho.

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    Default Re: California achieves another 'first'

    And borrowing another 3,000,000,000.00.



    A lot of people out there refuse to believe "it" will happen until "it" finally happens. The problem is "it" will happen slowly until finally they look around and wonder why they are paying $2,500 a month in rent to live with gang bangers on the street spraying up stuff. How do I know? Cuz it happened to me. I could go on but there is no point in doing so.

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    Default Re: California achieves another 'first'

    California is NOT unique. N.J. is technically broke. The Teacher's Pension Fund is undercapitalized by BILLIONS and Corzine is trying to close the budget gap by raising tolls ????
    New York has a $4 billion deficit and the Legislature wants a raise !
    N.Y.C. has a looming budget deficit.
    The reason is the same- out of control spending and borrowing on top of borrowing.

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Eric Stoner View Post
    California is NOT unique. N.J. is technically broke. The Teacher's Pension Fund is undercapitalized by BILLIONS and Corzine is trying to close the budget gap by raising tolls ????
    New York has a $4 billion deficit and the Legislature wants a raise !
    N.Y.C. has a looming budget deficit.
    The reason is the same- out of control spending and borrowing on top of borrowing.
    For the life of me I can't understand how politicians and states are allowed to do this. Ever year MA has budget, and has to stick to it, as part of the state constitution. Granted this is tax and spend Massachusetts, but it seems like a pretty easy check/balance system.

    And in those states you mentioned its only going to be getting worse with the economy the way it is.

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    Default Re: California achieves another 'first'

    Deficit spending is a way of life when your politicians try to bribe you for your votes. Blame YOURSELVES!
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: California achieves another 'first'

    I'm in Stockton as I type, and everyone is screaming about the mortgage foreclosure problem. Vacant houses mean increased crime (criminals do business in foreclosed houses), and people are leaving.

    I get questions like "What's Oregon like? Does it snow a LOT? How much is rent?" Etc.

    I just got my home appraisal back, and it went up in value by $45K since last July. This was surprising to me because of the foreclosure crisis. I knew my area was insulated, but I had no idea that the expanding economy in my region would be so good for me personally.

    Most houses are moving well if they are under $500K. The more expensive houses are still selling, but at a much slower pace. I've been involved in new home construction over the last few years, and work in that demographic has dropped quite a bit. But remodels are going through the roof! I guess small houses that are nicely appointed is what folks in Oregon are looking for. I don't mind remodels. Less poison ivy to deal with.


    Promote yourself and earn more money! This is a business that is owned by strippers for strippers. Let's make that money!


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    Default Re: California achieves another 'first'

    Why would a rational person pay 500,000 fo a 2500- sq ft house with standard contractor-level amenities? Doesn't that tell you not to live there? It's beyond comprehension to me. No wonder this happened.

    It's like paying $100 for a lap dance; it just raises the ante for everyone else; and it is still just a lap dance.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Banned Melonie's Avatar
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    Default Re: California achieves another 'first'

    ^^^ who ever said that people living in the worst real estate bubble areas were 'rational' ? Obviously they were highly motivated to move into such areas for some reason, but 'rational' doesn't necessarily play into that equation.

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Paris View Post
    I just got my home appraisal back, and it went up in value by $45K since last July. This was surprising to me because of the foreclosure crisis. I knew my area was insulated, but I had no idea that the expanding economy in my region would be so good for me personally.
    I take the position such things are not good for the home owner. The government gets a bit more of our stagnating cash flow with property taxes and assessments. A HELOC is a loan ... is debt - a house full of debt... debt you sell your house to pay off. Not a good thing. Then when it comes to sell it, fewer people can afford it. I could go on but these are the obvious.

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Melonie View Post
    ^^^ who ever said that people living in the worst real estate bubble areas were 'rational' ? Obviously they were highly motivated to move into such areas for some reason, but 'rational' doesn't necessarily play into that equation.
    I'm actually saying they aren't rational, same as you are. If it were fashionable, or 'cool', to drive a Hyundai Elantra what rational person would pay $75,000 for one? Or what if your bank were to suddenly realize that they are 'upside down' and decided to call in your Hyundai loan. Or your insurance company decided the salvage value was only $12,000 this month, so you'd be at the mercy of luck. Wouldn't you feel you need to rethink your motives. It's just too risky, for at least the reason we're talking about.

    I feel bad for the people who were there first with rational motives who now have to live with this mess. It isn't easy to move due to bad-acting neighbors or incompetent government. But sometimes you just have to. Another problem they had to live with is the real estate tax one; as irrational demand and speculation pushed up housing 'assessed values', and I use 'values' with a lot of sarcasm, their real estate taxes skyrocketed, likely beyond their ability to pay. And stupidly the governments still used property 'values' as their basis for taxation, when they should have turned to something like a combination of that plus a head count.

    We have to live with a huge amount of irrationality and stupidity in life, and then we die and are subjected to more stupidity even then.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

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    Default Re: California achieves another 'first'

    This would be funny were it not so tragic :

    From today's N.Y. Times - California is leading a protest by states and municipalities against the bond rating agencies threatening legal action. With straight faces, Cali officials claim that their bonds ( currently rated "A" ) deserve Triple "A" ratings. ROTFLMAO ! Are they serious ? With a $14 billion structural deficit ? With looming out-year deficits promising to be even larger ? With a DECLINING tax base ? With the state already leveraged to the hilt ?

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Eric Stoner View Post
    This would be funny were it not so tragic :

    From today's N.Y. Times - California is leading a protest by states and municipalities against the bond rating agencies threatening legal action. With straight faces, Cali officials claim that their bonds ( currently rated "A" ) deserve Triple "A" ratings. ROTFLMAO ! Are they serious ? With a $14 billion structural deficit ? With looming out-year deficits promising to be even larger ? With a DECLINING tax base ? With the state already leveraged to the hilt ?

    Hey. They are the government. They are accustomed to creating reality. At least, in their state. Now they want to export their fiscal poison to the rest of us and we are like "Not taking it man."

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Deogol View Post
    And borrowing another 3,000,000,000.00.

    http://www.latimes.com/news/la-me-cu...,5011538.story

    A lot of people out there refuse to believe "it" will happen until "it" finally happens. The problem is "it" will happen slowly until finally they look around and wonder why they are paying $2,500 a month in rent to live with gang bangers on the street spraying up stuff. How do I know? Cuz it happened to me. I could go on but there is no point in doing so.
    First of all kudos for your post in Dollar Den. Yes folks, California has asked the Fed for a $7 billion "loan" because it's credit rating is below "junk" status and no bank is dumb or crazy enough to lend them money.

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    Default Re: California achieves another 'first'

    ^^^ yup, I heard this on this morning's Bloomberg TV news. Of course, who can blame California politicians for trying to sell 'junk' muni bonds to the FED. After all, the FED was just saddled with buying $700 billion dollars worth of 'junk' mortgage bonds from private sector financial institutions ... so how can they say no to states who wind up on their doorstep with exactly the same problem.

    Even though the phrase 'tin foil hat' crowd raises eyebrows around this forum, there is indeed a 'tin foil hat' crowd theory as to what's really going on here. California doesn't have a problem selling additional muni bonds to cover their $7 billion budget shortfall by the end of this month. California's problem is that the state's single A credit rating will result in willing bond buyers expecting to receive an interest rate which is commeasurate with the 'junk' bond status ... but an interest rate that California does not wish to pay. So California's ploy is to try and substitute the US Fed's AAA credit rating for the state's single A credit rating in order to save multiple millions of dollars in interest cost.

    Assuming that the FED tells the state of California to p!$$ up a rope unless the state is willing to file for bankruptcy (which they more or less must do or they will be opening the door for federalizing state budget deficits across the country), California can then go public with the fact that they are being forced to sell single A rated muni bonds that pay interest rates of say 10% ! Now imagine that you just happen to be an uber-rich Californian ... and about to be subjected to both federal and state tax increases. But for $100,000 each, you will now be able to buy a California muni bond that will pay you 10% interest TAX FREE, and that also has an implied federal guarantee (well, as long as Nancy Pelosi keeps her Speaker's chair, anyhow ).

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    Default Re: California achieves another 'first'

    Quote Originally Posted by Deogol View Post
    And borrowing another 3,000,000,000.00.

    http://www.latimes.com/news/la-me-cu...,5011538.story

    A lot of people out there refuse to believe "it" will happen until "it" finally happens. The problem is "it" will happen slowly until finally they look around and wonder why they are paying $2,500 a month in rent to live with gang bangers on the street spraying up stuff. How do I know? Cuz it happened to me. I could go on but there is no point in doing so.



    Where do people live in California that pay 2,500 a month rent to live with gang bangers?

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    Default Re: California achieves another 'first'

    And they're off ! First Governor Patterson of N.Y. followed closely by Corzine of N.J.
    with Ahhnold moving up on the outside all with hats in hand asking for a Federal
    bailout.

    Where would it end if the Congress caves and rewards poor fiscal management ?
    Would every state and every city be entitled ?

    Hopefully Congress will tell them : "Drop Dead".

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    Default Re: California achieves another 'first'

    Where would it end if the Congress caves and rewards poor fiscal management ?
    Would every state and every city be entitled ?

    Hopefully Congress will tell them : "Drop Dead".
    well, given that NY, NJ and CA are all democratic bastions, and given that the entire federal gov't is soon to be democratic, odds are that Washington will be more than happy to 'share the wealth' from federal tax revenues of Texans, Oklahomans, Alaskans etc. with their 'poor, less fortunate' spendthrift fellow states !

    none too soon either ...



    It seems that our 'poster child', Vallejo CA, has now been forced by falling local tax revenues to vastly cut police and fire protection as a result of filing for bankruptcy ! Police coverage will be cut from 150 officers to 90 by the end of this year. For some strange reason, criminals have quickly figured out that their odds of perpetrating successful robberies and burglaries just increased greatly ... so the crime rate is rising like a rocket ! Those sixty officers are probably going to miss this job ... since the average pay rate was $121,000 - and a 90% of salary pension as early as age 50 !

    the 'tin foil hat' crowd would point out that extremely lucrative public sector employment cannot and does not 'create wealth'. In fact it is funded by governments 'sucking blood' from productive businesses and individuals. When those productive businesses and individuals have a strong incentive to relocate, when governments lose that private sector tax revenue, and when government has exhausted its credit limit in regard to borrowing, , there is no other option for governments other than to severely reduce public sector employment levels.

    ultimately, state and local governments cannot 'print' money to pay its bills ... but the federal government can !!! And this latest 'bailout the states' move amounts to nothing more than the federal government printing money and handing it to the states !


    I would add that the state of NY is now openly advertising 'Public Housing Authority Refi Bonds' ! In order to continue spending beyond its means on subsidized public housing for the poor, NY is now about to reward rich investors (who can afford the $50k minimum buy-in) with about a 10% TRIPLE TAX FREE interest rate payoff. Hey, at least New York has quite a few rich investors left ... as opposed to former Californian rich investors who are now Nevadans, Arizonians, Idahoans (and thus have little incentive to buy California bonds since they no longer have to pay California income tax).

    ~
    Last edited by Melonie; 11-01-2008 at 07:14 AM.

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