Saturday, March 24, 2012

california cities scrambling to avert insolvency...,

cnbc | When the city of Stockton, Calif., announced last month it would skip some bond payments and enter talks with its creditors, the municipal debt world shuddered. If Stockton were to file for bankruptcy protection, it would be the largest U.S. city ever to do so. Other troubled Californian municipalities might be tempted to follow suit. Predictions of mass defaults on municipal bonds might start to look a little more realistic.
When the housing market went bust, Lincoln's revenue shrank. City leaders responded by tapping reserves and slashing spending on public safety, which accounts for most of the budget. The city reduced the number of its police officers to 20 from 40 and closed two of three fire houses. Increased contributions by city employees to their retirement accounts also helped.

Bankruptcy isn't an option, said Mayor Spencer Short, adding that more cuts are coming: "I'm looking at the possibility of introducing a budget that's beyond bare bones."

Antioch, a city of 100,000 on the eastern fringe of the San Francisco Bay area, is another municipality clobbered by the housing slump. Unlike in Vallejo and Stockton, though, relations between Antioch's city leaders and labor units were not contentious, allowing quick action to cut costs when the scale of its financial troubles became clear, City Manager Jim Jakel said.

Jakel ticked off Antioch's moves to keep its books balanced: a hiring freeze; furloughs; employees waiving pay increases; and a city workforce reduced to 245 from 401 through attrition and layoffs.

Costa Mesa, a city of 110,000 south of Los Angeles, has slashed its payroll from 611 to 450. It is selling its police helicopters and has hired a neighboring city for air patrols. It's also pursuing a controversial effort to convert to a charter city from a general law city, which would give City Hall more power to outsource more work, said councilman Jim Righeimer.