Skip to comments.Our Cities Face a Deepening Fiscal Crisis (NYC, San Francisco, Chicago, L.A, all vulnerable)
Posted on 11/17/2010 6:53:20 AM PST by WebFocus
The steep fiscal crisis that many states face includes staggering retirement costs for their workers, estimated at some $3 trillion in unfunded future promises. The size of those liabilities has already shaken up some municipal bond investors, and the inadequate, sometimes misleading way that states account for these steep costs has attracted the attention of the Securities and Exchange Commission.
But lurking beneath those obligations is another huge set of liabilities from municipal governments, that is, from cities and counties whose politicians have also made astonishing promises to workers that they will have trouble keeping. Unlike states, which can't declare bankruptcy, a few municipalities have already sought the protection of the courts to try and solve long-term budget problems. More may be heading that way. Bondholders and taxpayers beware.
A recent study of the 77 largest municipal pension systems by finance professors Joshua Rauh of Northwestern University's Kellogg School and Robert Novy-Marx of the University of Rochester estimates that total unfunded liabilities of America's municipal pension systems is well north of half a trillion dollars. On a per capita basis, the professors estimated that each household in the 50 largest cities and counties they studied owes an average of $14,165 for future retiree liabilities. This, of course, is in addition to other debt these places owe, most especially their municipal debt. New York City taxpayers, for instance, owe about $65 billion of municipal debt on top of what Rauh and Novy-Marx estimate is $122 billion in unfunded pension obligations.
It will surprise few people to discover that these local pension liabilities are especially high in places where state obligations are already stratospheric. Clearly there is a culture in some places that supports handing out big pension promises for political gain, with little prospect that these obligations would be adequately funded
(Excerpt) Read more at realclearmarkets.com ...
It Begins: Detroit Neighboring City Of Hamtramck Asks For Permission To File For Bankruptcy
I see nothing wrong with municipal governments filing for bankruptcy. It can help them to get out of these unrealistic pension obligations and ensure that tax revenue actually goes to provide needed public services.
Our Democrat controlled Plantations is more accurate.
Just Wonder....if these leftest cities will get a clue when their bottoms fall out! I’d LOVE it if they are saved by conservatives who have to control them, haaa! I have the feeling many are in these cities to escape real life issues and think life is a free for all.
The free ice cream train is coming to an end. Its fun promising free ice cream but its a nightmare when you can no longer provide it.
If you think its bad now...just wait until Sept/Oct 2012!
These cities spend hundreds of billions. They have huge cash they just keep over spending on everyone except the taxpayer.
>> I see nothing wrong with municipal governments filing for bankruptcy
Plus, it’ll only take a few actual bankruptcies to teach the greedy unions what they can expect.
After that they’ll be amenable to renegotiating their outsize packages, reducing the outrageous pay and benefits of their minions, and making them pay most or all of their own damn retirement (like the private sector does) so the city they pretend to serve won’t have to go bankrupt.
If we don’t put greedy. lazy public sector employees back under our thumb they’ll be our nation’s downfall.
the city of los angeles sought and got what they wanted:
illegal mexicans (l.a. county is 2/3 mexican),
dumbed-down schools produce the new slaves for the democrat plantation.
california’s community colleges are equal to grades 5, 6, and 7.
Why does the media call it a "crisis" when the politicians' actions over the last few decades have very predictably led to these problems? Usually the media drumbeat for some sort of action predictably uses the word "crisis" I smell the drumbeat for another wack at the responsible taxpayers of the country being robbed at gunpoint by the government to make sure the irresponsible a..holes who spent their way into the problem don't face the consequences of their actions. They made their bed - let them lie in it
Sin city karma
This applies to States also. The question is, what happens to pensions, like those of Calpers in California, when they are guaranteed by the state? From my understanding, the state has to pay the pensions. How do they get out of it?
These cities and several states have dug their own hole and should not be bailed out. Let them go bankrupt.
Does it stop them repeating their mistakes? If the filing would actually restrain them from extending further credit, then it is an effective tool (for a while). If not, then it’s just a way of cheating particular municipal workers for the benefit of later ones. One would think that even mostly brain-dead city dwellers would make THAT connection sooner or later.
Speaking of pension funds a lot of people lost money in them due to the banks including people who are NOT in a state/federal pension plan. You know what happens then?
Taxpayers will pick up the tab.
This really gets old, especially when the lies continue on a literal daily basis....
This week in The Institutional Risk Analyst, we return to the financial travails of Ambac Financial Group (”AFG”), which recently filed bankruptcy after several years of twisting in the wind due to questions about solvency related to RMBS exposures. AFG, as it turns out, is the latest project of Treasury Secretary Tim Geithner, who wants to again protect the largest bank dealers and the market in over-the-counter derivatives from legal discipline.
What is IRA referring to?
Simple, really. Once again Tim Geithner is attempting to protect banks by finding ways to pay off their credit default swaps at par while creditors who have a privileged position at the front of the line get screwed - again.
Wisconsin insurance boss Sean Dilweg is clearly toeing the “team player” line set down by Geithner in the collapse of American International Group (AIG), namely always pay the banks and screw the bond holders and the taxpayer. In this case the taxpayers are the good people of Wisconsin. Will AFG’s insurance business really survive under this allegedly “optimal” rehabilitation plan proposed by Mr. Dilweg? It looks to us like he and Geithner are cherry picking the remains of AFG’s assets to pay the bank CDS counterparties and leave the sinking ship for the WI state insurance fund to clean up a couple of years hence.
So once again we have government officials interfering where they have no business being for the explicit purpose of bailing out the banks - while leaving those who bought insurance on the RMBS (that would be pension funds, including quite possibly yours!) to twist in the wind a couple of years from now when the money is all gone.
Anything new here? Uh, no.
That’s all you’re going to have left when these thieves get done with you.
You reap what you sow. Down you go, LIBs. Bankruptcy Party will be the new DIM party.
In a way I think it would. If a bankrupcy allows for a municipality to get out of its debt payments, then any bonds it issues to borrow funds in the future will have a terrible rating. People would be hesitant to buy the bonds and that would severely undercut a municipal government's borrowing ability.
I’d like to place a bid on Griffith Park Observatory.
I think I can charge admission and make it as a tourist trap.
Sell maps to the stars home etc.
Just trying to help L.A. with its debt.
How much of the looming financial crises of the states is because of the problems within their urban areas of their cities.???
Will a financial melt down in Chicago sink Illinois?