[lbo-talk] California City faces bankruptcy

Steven L. Robinson srobin21 at comcast.net
Sun Feb 24 20:34:09 PST 2008


(Local governments are also apparently among the victims of the "subprime crisis." SR)

Vallejo, others face cash crunch

Carolyn Jones, Staff Writer San Francisco Chronicle Sunday, February 24, 2008

Vallejo, which is teetering on the edge of bankruptcy, may have company in cities and counties around the Bay Area that are also being hit with the double whammy of vanishing tax revenue and ballooning payroll and retiree costs.

Reduced library services, fewer recreation programs, rotating fire station closures and deferred maintenance to streets, parks and buildings will become realities in many Bay Area cities over the next few years, officials say.

"Vallejo is certainly not alone," said Cynthia Kroll, senior regional economist at the Fisher Center for Real Estate and Urban Economy at UC Berkeley's Walter A. Haas School of Business. "The pressures of public safety and retirement costs are real. The fallout won't happen immediately, but we'll see it over the long term."

Vallejo has been particularly slammed by the downturn in the economy. The dismal housing market has meant a steep drop in transfer taxes, building and inspection fees, and supplemental property taxes. Transfer taxes, for example, are down by 70 percent in the city since 2005.

Meanwhile, police and fire costs make up 80 percent of Vallejo's general fund budget - about 30 percent more than the state average. Many cities, including Oakland and San Francisco, have had to continually raise public safety salaries to entice people to take jobs.

The Vallejo City Council is expected to vote Tuesday on whether to declare bankruptcy and slash funding to the library, museum, swimming pool and community groups. The city is also in last-minute negotiations with the police and fire unions to rescind a 15 percent pay raise.

Meanwhile, Vallejo police on Friday asked residents to call 911 only to report the most serious crimes, such as shootings, robberies or missing persons.

Emergency dispatchers are in such short supply that non-life-threatening incidents should be reported on a nonemergency phone line or on the city Police Department's Web site, vallejopd.com, beginning March 1, said William Powell, the department's support services manager.

"If your garden hose has been stolen, call the main number" - (707) 648-4321 - "and leave a message," Powell said.

A city hiring freeze has reduced the number of 911 dispatchers from 27 to 21, and cut the number of clerks in the records department from 19 to 5, he said.

The main lobby hours are also being cut by two hours a day beginning March 1. The new hours are 9:30 a.m. to 5 p.m. The lobby will be open until 6:30 p.m. on Tuesdays.

"We don't want to discourage people from calling the police - we just want people to be smarter about when they call," Powell said.

Vallejo library services haven't been cut yet, but branch manager Linda Matchette expects the bad news any day. Slashing library services would hurt thousands of Vallejo residents, she said.

"Our computers are booked solid, seven days a week," she said. "Circulation is up 3 to 4 percent every month. Our classes are packed. I don't see anything that can be easily cut."

Cities that are most vulnerable to financial crisis are those that relied heavily on property tax revenue during the real estate boom, Kroll said. Cities with strong industry, business and commercial districts are likely to fare better, experts said.

A city's budget problems can have a ripple effect in the long run, she said. Cuts to the police department usually translate to higher crime rates, while deferred maintenance leads to more potholes and overgrown parks.

To raise money, cities often increase fees and taxes, which hurts local businesses and homeowners, Kroll added. Over time, property values decline and tax revenue falls even further.

Bay Area cities are hoping to avoid that fate by keeping services as efficient as possible and living off reserves.

"We're weathering the storm, so far," said Harriet Commons, Fremont's finance director. "But the slowdown does have an affect on our budget. If the state continues having budget problems, we're all going to have budget problems."

Antioch has seen a drop in transfer taxes, sales tax and inspection fees, but has skirted disaster by dipping into its reserves, said Finance Director Dawn Merchant.

"We're all kind of in the same boat, but as long as we're fiscally responsible and monitor our expenses, we should be OK," she said.

Things aren't so stable for Contra Costa County, which will have to make deep cuts over the next few years to pay its burgeoning retiree bills, said county Auditor-Controller Steve Ybarra.

Supplemental taxes are down 50 percent from last year, he said, while property taxes did not rise as much as expected. Meanwhile, retiree health care costs have skyrocketed. The county needs to put away $216 million a year over the next 30 years to cover its retiree health care bills.

The outlook looks grim as Baby Boomers begin to retire, Ybarra said. The county has about 8,000 employees and 4,000 retirees, but over the next 10 years the numbers are expected to be equal.

"Things have got to change," said Ybarra. "We're all going to have to look at this, from the federal level on down. But so far in Contra Costa County, we're not going bankrupt, and that's the bottom line."

How to get involved -- Monday: Council members will hold a community meeting at 7 p.m. at JFK Library, 505 Santa Clara St., Vallejo.

-- Tuesday: The Vallejo City Council meets at 7 p.m. at City Hall, 555 Santa Clara St., Vallejo, to discuss ways of dealing with the city's fiscal crisis.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/24/BADLV78KJ.DTL

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