March 13, 2013 | 1992 views
Municipal bankruptcy could set national precedent
My column “New York’s exploding pension crises” caught the attention of a family friend living near the City of San Bernardino, in California. He suggested I read a column published in The Economist titled, “A Bankrupt City Takes on a Public Pension Behemoth,” i.e. the California Public Employees Retirement System (Calpers).
Let’s examine the broader implications of their action. To the best of my knowledge, they are the first municipality to file an emergency budget with a bankruptcy court that (if approved) would allow them to delay $13 million in required contributions to the sixth-largest pension fund in the world — a trend-setting plan that has Wall Street and debt holders alarmed that the pension fund might gain priority status in the repayment queue.
Grinding of teeth well past, Mayor Pat Morris indicated while the pension fund is its biggest creditor, his city cannot cut services any further without jeopardizing basic safety. He also mentioned their “particular troubles go back decades, caused by overbearing union agreements, political dysfunction, and financial commitments made during good times that could not be met in bad.” In the filing submitted, the city is willing to resume payment “at some future date to be negotiated with the creditor.”
Relevance! George J. Marlin, the author of Narcissist Nation and current Nassau County Interim Finance Authority (NIFA) board member writes, “the city of Buffalo, once the largest flour mill city in the western world and America’s fourth-largest manufacturing city, is on the edge of bankruptcy.” As of 2008, “it lost 48% of its population since 1960, lost its heavy industry and manufacturing base, and has 35,000 abandoned single-family homes.” The once thriving cities of Rochester, Syracuse, Utica, Binghamton and Schenectady share similar problems.