WSJ: California Town Weighs Bankruptcy Protection

Amongst local governments, North Las Vegas is closer to the precarious position of the City of Stockton, described in today’s Wall Street Journal (reproduced below) but many of the underlying symptoms plaguing Stockton are true for us, in varying degrees:

  • few new businesses or jobs
  • high and stagnant unemployment
  • falling property values
  • extreme foreclosure rates
  • falling tax revenue despite more taxes and higher rates

The City of Las Vegas now has to fit escalating mortgage payments, capped at $13-million per year, for its new City Hall into the budget starting this coming July 1. And it’s future finances are built on receiving back $6-million in cash from the Mob Museum, not a certain proposition. Meanwhile, the City is choosing to short-staff a new fire station a quarter-mile north of the Ward 2 boundary.

Bob Beers is the only candidate for Las Vegas City Council who has experience understanding how government finance works. He’s a Certified Public Accountant and Certified Fraud Examiner. He spent ten years representing Las Vegans in the state legislature, and was always assigned to the finance committees.

Other candidates for City Council have experience making zoning decisions (one was even a real estate developer while simultaneously “serving” on the Planning Commission, believe it or not!). Well, we won’t be needing to do any zoning decisions if we don’t get the City’s financial house in order.

Wall Street Journal

February 25, 2012

Stockton, Calif., one of the hardest-hit cities in the country in terms of real-estate foreclosures, is weighing whether to seek Chapter 9 bankruptcy protection from its creditors.

“The city is in an immediate and severe fiscal crisis and it is or likely will become unable to meet its financial obligations,” City Manager Bob Deis wrote in a memo to council members. “Absent some negotiated adjustments to the city’s financial obligations, the city will be insolvent and will have no alternative than to seek bankruptcy protection.”

The City Council will meet Tuesday to consider a resolution that will authorize the city to enter a “neutral evaluation process” with creditors, which is the first step under state law for a municipality considering bankruptcy. The resolution would also allow the city manager to suspend certain bond payments for the rest of the fiscal year…

For the fiscal year that began July 1, 2011, the budget deficit was $37 million, about one-fifth of the city’s general fund revenue.

According to data from RealtyTrac, Stockton has ranked in the top 10 metro foreclosure rates every year since 2007, when it was No. 1. Meanwhile, the city’s unemployment level has nearly doubled since 2006, hovering around 16% in December 2011, according to the U.S. Bureau of Labor Statistics.

Stockton, a city of about 290,000, is about 80 miles from San Francisco and 45 miles from the state capital, Sacramento.

Last year, Stockton again declared a state of fiscal emergency, allowing it to make steep spending cuts as it tried to rebuild its finances. In a budget message last June, Mr. Deis said Stockton was nearing “insolvency.”

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