From Stark
Civic leaders in Stockton, Calif. had a bold vision for their city’s future in the real estate bubble years. But then the bubble burst, and the city of 300,000 is lurching toward bankruptcy.
Read about it in the Los Angeles Times.
This episode, and the closer-to-home financial disaster in Wenatchee, (read more from the Wenatchee World) show the importance of giving civic development projects the closest possible scrutiny before public funds are committed.
Stark:”This episode, and the closer-to-home financial disaster in Wenatchee, show the importance of giving civic development projects the closest possible scrutiny before public funds are committed.”
Really? I think Stockton’s bankruptcy illustrates exactly what happens when those who profit from growth are subsidized by the rest of us. Had Stockton charged adequate impact fees that covered the costs of expanding its infrastructure, it would not be in the bleak situation it now faces.
If those who profit from growth don’t pay for the costs associated with growth, insolvency will be the norm, not the exception.
Will Bellingham and Whatcom County learn our lesson?
People in Stockton don’t consider the re-development to be the root of the problem. They say that the real problem, the reason that they haven’t been able to crawl out of the hole that they are in is because of the public employee union contracts that they haven’t been able to renegotiate.
People in Stockton don’t consider the re-development to be the root of the problem. They say that the real problem, the reason that they haven’t been able to crawl out of the hole that they are in, is because of the public employee union contracts that they haven’t been able to renegotiate. Bankruptcy will void all contracts with the union and they will be able to start over.
When you say “people in Stockton” aren’t you really referring to Guy Domench, the jukebox repairman at Bradley’s bar? I’m not sure Mr. Domench is the best authority on Stockton’s problems.
“Stockton, California, which is heading toward the first steps of Chapter 9 bankruptcy, is described as a crime-racked wretch designated by Forbes magazine as the most miserable city in America…
Unfortunately, the financial mess in Stockton echoes problems throughout California, even though public-sector union leaders and Democratic state legislators are in denial about this reality. In cities as affluent and diverse as San Jose and San Diego, municipal finances are hitting the wall, driven by unsustainable pension debt and health-care promises made to government workers during more flush economic times….
http://www.bloomberg.com/news/2012-03-02/if-stockton-is-broke-then-why-isn-t-san-diego-steven-greenhut.html
AFY!!theheelotsheepdog!!!
.
Isn’t an underlying circumstance in Wenatchee an alliance of civic officials with developers that transfers public wealth to private individuals? Isn’t this the same circumstance that has resulted in financial strain in many communities? The private individuals are facilitated in taking unreasonable risks by the government assuming the downside and taking a limited upside. Examples are everywhere: Jean Melious blog cites Olathe, Kansas, where the BNSF paid 2% and the taxpayers 98% of the cost of railroad overpasses to ameliorate the delays from coal trains; Detroit’s problems go back to a 19th century mayor funding sprawling development, rather than maintaining existing sewer and water; Ontario citizens throughout the province may still paying for the domed stadium in Toronto; Kevin Johnson found money to subsidize an NBA team stadium, while cutting services to the homeless in Sacramento.
This disaster could have been largely avoided. I’m speaking of the housing crisis, the Great Recession, and the foreclosure crisis that has been weighing heavily on municipalities and state budgets all across America, especially places like Fresno, Modesto, Las Vegas, Phoenix, and Palm Beach.
Yes, this economic calamity could have been largely avoided, if only the federal government had acted to bail out Main Street in 2008, instead of bailing out Wall Street.
The Federal Government should have seen to it that all of the predatory, unsustainable, and toxic subprime mortgages in the financial system were refinanced into traditional, stable, 30-year, fixed-rate mortgages at fair interest rates.
At least that would have given unsuspecting borrowers a fighting chance, especially those stuck with exploding interest-only and adjustable-rate mortgages. Recall what happened. Those subprime toxic time bombs, which had been pushed on unsophisticated borrowers and marketed as “creative financial instruments,” were systematically repackaged into AAA-rated, investment-grade securities and then sold to unwary investors, including our public employee pension funds.
If the federal government had acted swiftly to eliminate these fraudulent financial instruments from the system, it would have helped individual homeowners, while simultaneously replacing most of the toxic assets on bank balance sheets. It would have also dramatically helped sustain home prices in the U.S., prevented the tidal wave of underwater mortgages, and headed-off the current foreclosure crisis.
If the federal government had bailed out Main Street instead of Wall Street, millions upon millions of homowners would not have lost their homes to the banks through foreclosure, unemployment rates would not have skyrocketed, consumer confidence and spending would have remained much higher, property values would have been supported, and the sales and property tax revenues that state and local budgets rely upon would not have fallen off a cliff.
What if there was no fannie or feddie or bail outs?
What if loans were made to people who could pay them back?
What if the banks knew if they made loans to people who could not pay them back instead of being bailed out(the banks) they had to eat the bad loans?
What if people or banks who sign contracts know going in that if they don’t meet their obligations they will have to pay the piper and there will be no bailout!
Here’s a real novel what if: What if people and banks are held responsible for their actions; would they then be more responsible in their actions?
AFY!!theheelotsheepdog!!!
Oh, one more what if:
What if; Stockton had made sustainable pension and health-care promises to their government workers or were to change their promises to be that?
AFY!!theheelotsheepdog!!!
This was written a few years ago but I bet ya it still applies today:
“California’s public employee unions not only sit on both sides of the bargaining table, but also have it both ways rhetorically. They are happy to act as ventriloquists when the people don’t know what to say or think about an endless list of complicated, arcane, and tedious policy questions….
Two problems. First, the assurances by officials from the California Public Employees’ Retirement System (CalPERS) that a permanent stock market boom would cover the enhanced pension obligations proved immediately, and ruinously, off base. The state’s required contribution to the more generous retirement system in 2008-09 was supposed to be $379 million, according to the original CalPERS projection. The actual figure needed to cover the amount not generated by the CalPERS investment portfolio was $4.6 billion….
Second, the same political forces that made the public pension system extravagant keep operating to make it ever more unaffordable. One result is that the portion of the state workforce eligible for the more generous pension benefits available to public safety workers has increased steadily….
http://www.claremont.org/publications/crb/id.1650/article_detail.asp
A very interesting article!
California is America’s Greece just waiting to blow up, and those who promote anarchy and chaos in this country will take every advantage of it, IMHO!
AFY!!theheelotsheepdog!!!
It should be pointed out, AFY, that a lot of lenders knowingly made sketchy loans NOT because they knew they would get a gov’t bailout. It was because they enjoyed a free market in such loans. they could and did sell those loans, along with the risk, to other investors.
Fannie and Freddie often (but not always) served as intermediaries in this market. They bought loans, but then in effect resold those loans in the form of bonds to investors.
But john; what if my what if’s were true then we would have the what if of where we would be today, so me next what if is; would we be better off? IMHO, yes!
Those bad loans/actions were made with the government blessing and even promotion, loan making in this country is highly regulated and audited in more than one way, one could say far from a purely free market methinks, not that I have ever advocated that completely !
Just goes to show how some public (get more people in more houses) private (make more money) sector planning may be a road of good intention that does end in hell!
The very bad news is that we are on that same road today and have not yet decided to make a real detour!
AFY!!theheelotsheepdog!!!
Didn’t one of our local planners have his fingerprints on the Wenatchee disaster?
I’s found an old article where he was interviewed and he said “staff, who are usually beat up on, spit upon”, I’s just wonder; was that related?
http://goliath.ecnext.com/coms2/gi_0199-5528226/A-conversation-with-David-Stalheim.html
AFY!!theheelotsheepdog!!!
It’s seems to me it’s always the fault of the government or government workers and their pensions. I rarely hear anyone debate that having presidential contenders promise more tax cuts EVERY four years so they can win votes, is part of the ongoing problem. The idea that government should live within its means is impossible, if every four years you are going to cut the taxes more and more and you twist up the tax code so the rich can scoop a little more cream off the top, or take their money offshore to avoid taxes.
No, I’m not suggesting that is the whole problem because it’s not, just that I’m sick of the argument that government still needs further cutting, cutting, cutting and that those darn rich gov employees are really the problem.
I think very few of us have a clue what those that depend on many of the social services being cut first (and deep) are going through, much less the workers (like me) that have taken several cuts to salary and to benefits already over the last few years, and those (like me) that are losing jobs we gave 110% to because we believed we really were there to work hard and make a difference in our communities. It seems so long ago, but I remember growing up really believing it was one nation, under God, indivisible. And now it’s all about mine, mine, mine. Being a government employee used to be something to be proud of, not because you were going to live big, but because you were serving your community or country, while making a modest middle-income living.
And when I hear a comment like this Mr. Galt, it makes my stomach turn “Bankruptcy will void all contracts with the union and they will be able to start over.” Hey, no biggie right? Just bail on what you owe and promised hard working Americans that earned that money and reset the clock? Or did I misunderstand what you meant. Accept my apology if I did.
Last night’s national evening news had a firefighter in a small town that gave his whole working life to his small community. He retired with a modest pension (like most state employees do) and he owned a very modest home. The city filed bankruptcy, and in turn, cut his pension – like many others in the town – in half. They interviewed him in front of the little home he used to own before the bank foreclosed, and then they interviewed him in the little apartment he will live out the rest of his life in. A man like many in his town that risked his life to protect and serve his community, who will live out his days like a peasant. Is this really what we are striving for?
I think it’s disgusting and sad. Soon government jobs will be diminished to being worth about five bucks more than a job at KFC or McDonalds. And the funny thing is that people actually think they will save money and get the same quality of applicants and service from a less trained, less paid, high-turnover work force. Wow!
Now if we could just get the guy on fries working at Boeing, just think how much cheaper air flight could be. Who needs a qualified, well paid work force? Anybody can do it, right?
I’m just saying, the answer isn’t as simple as some of the hard nosed BS I read and hear between the left and right on a daily basis. At some point (hopefully before there is nothing left to fight for) we will act like Americans and get back to working together for the betterment of all. It isn’t going to happen as long as government employees or the rich are the daily buggie-man.
The real story here in this blog is the commitment that was made and will be broken when they file for bankruptcy. The lives that will be utterly ruined. The people (unlike me) that will not have time to start over. We need to make changes, but turning our backs on those that earned a pension is not okay. It’s theft.
We’ve made tax cuts we couldn’t afford, and we will now pay for them with money that should have been secure and by stealing the change out of every blind man’s tin cup. Enjoy that extra latte you get with that next tax cut, just don’t forget who ‘s really paying for it.
It is amazing how government, just keeps getting smaller, don’t ya know!
AFY!!theheelotsheepdog!!!
Yes DC, who needs the qualified well paid workforce, breaking records every day…get your pension plan invested right here in the 4th Corner…
Did the fireman elect the politician who then issued the bankruptcy, and Chapter 9′s Finest, right here in the 4th Corner,
DC, is that for Dunce Cap, Yes Sir, Yes Sir, three bags full sir.
The most infamous default cases involving general obligation bonds include New York City’s default in 1975 and Cleveland in 1978. The largest default in the history of the municipal bond market was the Washington Public Power Supply System’s (WPPSS) default on $2.25 billion in bonds. WPPSS launched a risky program to build five nuclear power plants in the 1970s to supply electricity to the Pacific Northwest. Only one of the five planned nuclear plants was ever completed. The WPPSS fiasco gave a lot more credibility to concerns that tax-exempt bonds were not a completely safe bet.
At McDonalds you get what you pay for, just like at Boeing, in Government you get another excuse, and as far as tax cut’s go, explain where any local Muni Corporation has cut taxes anywhere?
AC-DC, they don’t want gas, coal, hydro, or the Nuclear too, and where exactly are all these tax cuts your discussing, I can’t find any? ANYWHERE!
http://dor.wa.gov/content/findtaxesandrates/salesandusetaxrates/doingBus_LocSaTxChNts.aspx
It’s a tax cut allright, and who paying it?
And have we got a new and improved tax cut for you!@Default.Com
http://dor.wa.gov/Docs/Pubs/SpecialNotices/2009/sn_09_WhatcomMntlHlth.pdf
Liberty,
You can’t find tax cuts anywhere? And your on a computer. Hmmm…..
We’ve had major tax cuts from just about every President since Reagan, who dramatically cut the capital gains tax. Then you got George Bush senior, Clinton and Junior Bush.
You couldn’t find those huh?
Who can tax the sunshine? . . . “The Government Can”
http://politics.gather.com/viewArticle.action?articleId=281474977792902
AFY!!theheelotsheepdog!!!
Stark said, “This episode, and the closer-to-home financial disaster in Wenatchee, show the importance of giving civic development projects the closest possible scrutiny before public funds are committed.” I agree with John on this one.
The debacle in Ferndale with the construction of an 18,000 square foot palatial police station, desperation sales tax increase, inability to stay within a reasonable budget, legalized theft of private property, and general lack of comity between City Hall and the citizens of Ferndale all reinforce John’s point – civic improvements need to be scrutinized BEFORE public funds are committed. Of course, if you do this, you should expect to be publicly vilified and showered with hate by the mayor and his lackey, just as I have been by Gary Jensen.
DC?
Were discussing Muni Default, Muni’s don’t have a printing press like Obama, and when exactly was Bush, Clinton, Bush or Obama, in charge of a Municipal Tax?
Federal, State, and Local? Oh, of course even at the Federal Level, the Executive is in charge of $0.00.
Article 1, states clearly who has the purse, Patty Murray and Maria Catfindherwell out on another shopping spree as usual, and blamin Bush, for their spending prioities?
“In spite of my shattered dreams of the past, I came to Birmingham with the hope that the white religious leadership of this community would see the justice of our cause and with deep moral concern, serve as the channel through which our just grievances could get to the power structure. I had hoped that each of you would understand. But again I have been disappointed…Letter from a Birmingham Jail…MLK.
TODAY?
Chapter 9, Birmingham Alabama’s new record…wrong Person in jail, as usual.
You can take the sewer away from the people, but you can’t take the people away from the sewer.
Pierce County Housing Authority?
9-11?
http://en.wikipedia.org/wiki/Chapter_9,_Title_11,_United_States_Code