An article appearing in the New York Times headed “California City’s Return to Solvency, With Pension Problem Unsolved” reports:
“Before Detroit filed for bankruptcy, there was Stockton.
“Battered by a collapse in real estate prices, a spike in pension and retiree health care costs, and unmanageable debt, this struggling city in the Central Valley has labored for months to find a way out of Chapter 9. Now having renegotiated its debt with most creditors, cobbled together layoffs and service cuts and raised the sales tax to 9 percent from 8.25 percent, Stockton is nearly ready to leave court protection.
“But what Stockton, along with pretty much every other city in California that has gone into bankruptcy in recent years, has not done is address the skyrocketing public pensions that are at the heart of many of these cases.”
Notice, that unlike the cruel and self serving bail out imposed on Harrisburg citizenry (and indirectly those in Lancaster County) by Gov. Tom Corbett to benefit the chief bond holder for the city, in Stockton it was the creditors that had to accept a large reduction in interests and principle when the city filed for protection under the Federal Bankruptcy Act.
All the Harrisburg bond guarantor was required to do was postpone some bond payments but an arrangement has been made for them to likely recoup any losses in the future.
So who was stiffed? The Harrisburg citizenry… and Lancaster County residents, indirectly through the sale of the environmental questionable and long plagued Harrisburg incinerator to the Lancaster County Bulk Waste Management Authority.
LCBWMA’S own president acknowledged at a board meeting that the price should have been half as much. And no one else was interested in making the purchase!
Let those who invest municipal bonds take the same caution as those investing in corporate bonds. Let them understand that if worse comes to worse the municipality or public authority can and will enter bankruptcy procedures and the court will endeavor to reach a remedy that is fair to all parties.
Corbett didn’t want a bankruptcy filing. He needed grateful bond holders and their collaborators to pour contributions into his 2016 campaign.
When bankruptcy justice is in the offing, we are less likely to see a proliferation of convention centers, arenas and stadiums of dubious viability. Let the market place protect the citizenry even if their elected officials won’t.
Of course in the Lancaster Convention situation, the elected county commissioners did raise serious objections and were persecuted out of office for warning about what has actually transpired. And the ‘cats paw’ district attorney who carried out the year long witch trial was elected and re-elected as a county judge.
