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Tuesday, June 17, 2008

When a city spends itself into the tank

A reader who shares our interest in municipal bankruptcy sends along this comprehensive piece about what's going on down in Vallejo.

Comments (5)

I was there until the last paragraph when they talked about building the cancer research center, convention center, etc, shades of SoWhat, with all the money they save from pensions. How about reopening their swimming pools and other public services.

I'd wager municipal bankruptcies are going to become fairly common soon. I hate to say it, but we're in a nice "perfect storm" for states and cities. Falling real estate prices and sales reducing property taxes. Increasing gas/food prices making sales taxes unpalatable or unaffordable. And, the shift in defense spending. Not a lot of people talk about it but we've moved the impact of our defense spending. 20 years ago, it was supporting a network of bases here. Funds were spent locally to maintain the bases and soldiers were stationed here (and spent their pay here). The cold war was great for the economy. now, instead of paying local contractors for landscaping, dry cleaning and construction, we're spending that same money on bases in Iraq, Afghanistan, and across Europe. We've shut down hundreds of bases in the last twenty years; each time, its a death knell for the host city.

I think the economy will improve when we stop fighting small regional conflicts and get into a long, hard staring contest with China. Massive shift to the Pacific coast, new military bases, and the attentent local spending.

I loved the part about Detroit to sell "fiscal stabilization bonds" to cover massive budget deficits. Now what idiot would buy these.

Was anyone else appalled at the pay scales for Police & Fire Fighters in Vallejo, as much as I was? With family still living in the Bay Area in pricey Marin County, and as an ex-City of San Francisco employee myself; I found the pay scales for those folks simply over the top. Especially, given that Vallejo is largely a middle-to-low income City, with a declining business base.

You lost me. "20 years ago, it was supporting a network of bases here. Funds were spent locally to maintain the bases and soldiers were stationed here (and spent their pay here)."

Where's "here"? Oregon is the only State with NO Def.Dept.-military installed base.

If you don't count the cluster bomb-manufacturing contract flooding money into (Allegheny Metals' Teledyne) Wah Chang, in Albany; and you don't count the CIA slush pile of drug-smuggling money landed in Evergreen Aviation's nefarious espionage flights, in and out of McMinnville Airport, before all the money got laundered by rollover to 'go legit' (after the Cold War) posing as an Air Museum of Cold War boondogglery -- "and they charged the people, a dollar-and-a-half just to see 'em" - Joni Mitchell -- including preserving in amber the original (1946) cost-plus no-account (the war was over, stupid) public-money contract ripoff, who's Hughes 'Spruce Goose.'

By the way, speaking of civil bankruptcy, today, big news for anyone whose life was invested in an economy the way it used to be, (before Bushbutcher), the London Telegraph newspaper is reporting if you're chained to your car bumper, you should check if it's a noose, since the ground beneath your butt is about to look like something Wile E. Coyote stares into: Royal Bank of Scotland issues global stock and credit crash alert, By Ambrose Evans-Pritchard, International Business Editor, 18-June-2008.
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns ... by September as "all the chickens come home to roost" from the excesses of the global boom ....

But ... who ever heard of the Royal Bank of Scotland, and whadda they know, anyway.

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