Wednesday, April 14, 2010

Los Angeles is going to go Bankrupt

Going for broke in L.A.?

Former mayor Richard Riordan has been roiling the civic waters by arguing that the surest -- and perhaps the only -- way out of Los Angeles' fiscal crisis is a declaration of municipal bankruptcy, which he believes ought to come sooner rather than later.

In a conversation with The Times over the weekend, Riordan argued that bankruptcy may be the only way to attack the structural problem gnawing the heart out of the city budget: unsustainable public employee pension costs. Currently, Riordan says, the city is struggling to meet its pension obligations, and that's assuming it will receive 8% annually on the money invested on retirees' behalf. In fact, the average return over the past decade has been just 4%. Over the next few years, L.A. may be looking at $1.5 billion in pension obligations it can't meet. "We need some adults to come alive in the city and to talk through how to meet that liability," he said. "If that doesn't happen, we shouldn't rule out bankruptcy."

Mayor Antonio Villaraigosa's chief of staff, Jeff Carr, says categorically that "this mayor has made it clear that we are not going to declare bankruptcy." Moreover, while federal law lets bankruptcy judges reduce negotiated pension and health benefits in the private sector, it forbids changes in public employees' agreements.

Interesting federal law that forbids changes in public employees' agreements.

At one time I could never imagine a city like LA going bankrupt. LA is the second biggest city in the USA.

California is in trouble. The whole state is going to go bankrupt. Welcome to the progressive version of the future. They are hiking energy rates across the state because they mandated "green" renewable energy. The refuse to drill off their coasts and harvest the oil that lays patiently for them. It is amazing.

The State of California will be bankrupt at some point. The cities in California are about to go bankrupt, some sooner, some later. And on a nationwide level, Uncle Sam might reach the same fate. Our whole country is bankrupt. At least we have Obamacare and green energy.

The California city of Vallerjo went bankrupt in 2008. The details are both delicious and nutricious.

Vallejo's Painful Lessons in Municipal Bankruptcy
Two years after going broke, the California city still

Vallejo is a Bay Area community of 121,000 that two years ago became the state's largest city to declare bankruptcy. Like other municipalities, its public-sector unions had driven its budget deep into the red. A report issued by the Cato Institute last September noted that 74% of the city's general budget was eaten up by police and firefighter salaries and overtime along with pension obligations. The average city in the state spends 60% of its budget on those things.

The study also found that lavish pay and benefit packages were a root cause of the city's problems. In Vallejo compensation packages for police captains top $300,000 a year and average $171,000 a year for firefighters. Regular public employees in the city can retire at age 55 with 81% of their final year's pay guaranteed. Police and fire officials can retire at age 50 with a pension that pays them 90% of their final year's salary every year for life and the lives of their spouses.

Over the past five years, Vallejo has slashed spending where it could, mostly by cutting personnel and services. As a recent San Francisco Chronicle editorial pointed out, the city cut its police force to about 100 officers from nearly 160 and warned residents to use the 911 system judiciously, even while it experienced crime rates higher than other comparable cities in California. The city has also cut funding for a senior center, youth groups, and arts organizations and has done little to restore an increasingly decrepit downtown, develop waterfront properties, or attract new businesses.

Imagine the Police Chief that retires at 50 and makes $300,000. He gets $270,000 (90%) a year every year (not including health benefits) for the rest of both his life and the life of his spouse. The odds of them living into their 80's isn't off the hook. You could have 35 more years to pay that sum easy. That would amount to be about 10 million dollars not even counting the health benefits. It is staggering.

Consider the hypothetical case: Let's say I worked hard when I was in the police corps and I rose to the top job. It took me 25 years. I graduated at 22, applied and went into the academy at 23, and after 25 years in service I am now 47. In three years I am going to retire making $270,000 a year. I do this so my best friend and loyal confidant who is vice Chief can retire next year. It isn't like we are paying 1 guy $270k a year, as soon as these guys get the creds the pressure is on for them to retire so their friends can move up. Who wants to work past 50 if you don't have to?

I wonder how many people just from this small city get pensions of over $100k a year. I have seen some data from San Diego's firefighters in the past and it is something.

I have never made $270,000 in a year. I am still holding out hope that I can accomplish this feat in my dreams. But imagine a public servant making that every year in retirement. I am jealous. I would love that life. Not only that life, but the life of the poor schmucks that only make $100,000 every year in retirement with full government health benefits to boot.

But the catch is, they are all going to go bankrupt. Los Angeles is going to go bankrupt. San Diego is going to go bankrupt. California is going to go bankrupt. Unless the feds step in, I can't see any way around it, and I find it hard to see the feds stepping in, because I will clue you in on a little secret, they don't really have any money either.

Update: 1 in 3 San Francisco employees earned $100,000

More than 1 in 3 of San Francisco's nearly 27,000 city workers earned $100,000 or more last year - a number that has been growing steadily for the past decade.

The number of city workers paid at least $100,000 in base salary totaled 6,449 last year. When such extras as overtime are included, the number jumped to 9,487 workers, nearly eight times the number from a decade ago. And that calculation doesn't include the cost of often-generous city benefits such as health care and pensions.

LA is going bankrupt. California is going bankrupt. The progressive vision of our future is going bankrupt. Sphere: Related Content


Declaring Personal Bankruptcy said...

Declaring Personal Bankruptcy

Thanks for sharing such an interesting information.........!!!!!!!!

Shakes The Clown said...

Thanks bot!

gordon gekko said...

But hey, We've still got medical marijuana!


Cheech and Chong

Shakes The Clown said...

Medical Maryjane is one of the few sane things I think they have done. That are going to need that ganja too when the big collapse comes.

Who would have thought that paying firemen $170,000 a year would have such adverse consequences?