by Chriss Street
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Atwater, California just admitted they do not have the cash flow to make a $2 million municipal bond payment due in November and may become the 4th local California government file for Chapter 9 municipal bankruptcy this year
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. The 28,000
resident community farming community has been strangled for over the battle
with environmentalists more interested in protecting the lifestyle of a three
inch fish called the Delta Smelt than family farms. With the city burdened with
crippling unionized public employee wage and pension costs, while private
sector wages and property values drop, Atwater is the latest in a soon to be
tidal wave of local government failures.
Beginning in 2007,
Federal Judge Oliver Wanger imposed limits on the amount of water pumped from
the San Joachin-Sacramento River delta to farms in California's Central Valley
in order to protect a two-inch endangered fish called the Delta Smelt. As a
result, hundreds of thousand acres of farmland lie fallow, and tens of
thousands of jobs were lost. Over 200,000 farmers, migrant workers and their
family members were financially devastated. Homeless shelters and bread lines
were overwhelmed as crops withered and banks foreclosed on family farms. Local
public schools continue to report rising malnutrition as many proud families
are too embarrassed to take government welfare.
When the U.S. House
of Representatives Congress passed San Joaquin Valley Water Reliability Act
(H.R. 1837) to try to restore the water flow, but California’s two U.S.
Senators, Barbara Boxer and Dianne Feinstein, fought off the legislation in
July by convincing President Obama’s senior advisors to recommend a Presidential
veto. A disgusted Speaker of the House John Boehner said on the House floor
that using the Endangered Species Act to protect a fish at the expense of food
production and economic growth is “a perfect example of the overreach of
government”.
The median home
price in Atwater has plunged from $336,000 in June of 2007 to just $140,000
today and unemployment has surged to 21%. The 2010 Atwater median household
income was $42,226, 19% below the national average of $51,914. Almost a fourth
of the population is now considered below the poverty line, compared with 13.7
percent statewide, according to U.S. Census figures.
Even with all this
pain and suffering, Atwater’s city tax revenue fell by only 20% since its peak
in 2007. Atwater did reduce its bloated union payroll from 120 to 80 since
2008, but mostly through attrition and laying-off low paid younger workers. To
keep the lights on the city depleted its cash reserves, while union wages
continued to rise and the cityagreed to pay all
general employees’ portion of mandatory pension contribution and all but 2%
mandatory contribution for highly paid police and firefighters. The city’s also
continued to pick up most of the cost of health-care premiums that rose by 15%
this year and are scheduled to rise 10% next year.
With the threat of
bankruptcy, wages may now be slashed. According to Atwater Mayor Joan Faul, “We
just started negotiating with our unions and they are going to have to take a
major cut," Mayor Joan Faul said. "We hope that once we declare a fiscal
emergency that they will realize that we are definitely in an emergency. If
they want to save all the jobs, everyone is going to have to take a cut."
Standard and Poor’s
seems to have been shocked to learn that city is broke and hacked Atwater’s
Public Financing Authority’s wastewater revenue bonds solvency rating on
September 24th from a strong credit-worthy A rating to a
BBB- junk-bond rating.
Under a state law
passed by California’s ultra-liberal legislature and signed by Governor Jerry
Brown last year, cities seeking bankruptcy protection are forced to first
declare a fiscal emergency or hold talks for 90 days with creditors through a
mediator or wait for 60 days if they run out of money. With Atwater and many
other local government cities and agencies about to bounce payroll checks,
California bankruptcy courts are going to need to go on a hiring binge to
handle the coming long lines of municipal failures.
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