Agencies expect more cities to go under { Golden State Bankruptcies }

San Francisco Chronicle ^ | 8/21/12 | Kathleen Pender

[SmithL]

For the second time in as many business days, a major credit-rating agency said it expects more municipal bankruptcies and bond defaults - particularly in California, where cities have less flexibility to raise revenue or cut spending and face little intervention from the state.

On Monday, Fitch Ratings said in a report that it "anticipates an increase in defaults and bankruptcies, although it does not expect them to be widespread."

It said that recent bankruptcy filings by Stockton, San Bernardino and Mammoth Lakes "reflect perhaps the most difficult local government fiscal environment in the U.S.," adding that "fiscal crises are more likely in states that, like California, lack flexibility on both revenue raising and spending control."

...

Causes for concern

In their reports, Moody's and Fitch cited reasons why they believe California cities will continue to face fiscal pressure:

-- California, especially the Inland Empire, has been clobbered by the housing crisis, which has reduced property tax revenue. But unlike other hard-hit states such as Florida, local governments can't offset falling property tax values by raising the tax rate because of Proposition 13.

-- The weak economy has reduced sales taxes, another important revenue source for cities.

-- The state's pro-labor stance makes it harder for cities to renegotiate employee pay and benefits, which typically account for two-thirds of municipal budgets but can reach 80 percent, Fitch said.

Fitch notes that 23 states do not require employees to join and pay dues to established unions as a condition of employment. California is not one of these right-to-work states.

Moody's also said that "generous labor contracts awarded in boom times have proven hard to reverse" in California.

[SmithL]

23 states do not require employees to join and pay dues to established unions as
a condition of employment. California is not one of these right-to-work states

Thank you, Governor Moonbeam!

[Iron Munro]

Agencies expect more cities to go under

Ayn Rand called it.

[hattend]

...local governments can't offset falling property tax values by raising the tax rate because of Proposition 13.

Hmmm...let me guess what repeal law the Dem loaded legislature and Moonbeam Brown have in their sights.

[familyop]

"...local governments can't offset falling property tax values by raising the tax rate because of Proposition 13."

There's a socialist court challenge against TABOR (restricts tax hikes to voter approval) in Colorado. Watch out.