Thursday, May 27, 2010

Miami Commissioner Says Bankruptcy is City's Best Hope; Chris Christie Says New Jersey Careens Towards Becoming Greece

I keep waiting for some large city for some large city to take initiative and declare bankruptcy to escape onerous burden of public pensions. Perhaps Miami is that city.

NBC Miami reports Miami Budget Begging for Bankruptcy http://www.nbcmiami.com/news/politics/M ... Miami.html

Please click on the above link to see a very interesting video. The video is not embeddable.

Partial Transcript

The city of Miami is in such financial dire straits that commissioner Marc Sarnoff is using the "B" word, bankruptcy.

"We are not the only city, municipality to be going through this. It looks like Los Angeles sometime next week or the week after will be going bankrupt. It looks like there will be 30 more cities following suit."

Increases in public worker salaries is one of the main reasons why the budget is so tight. The average salary for a Miami city employee is $76,000. The average salary for a Miami city resident is $29,000.

Employee pensions are choking the budget too. In 2000, pension payouts cost taxpayers $16 million. In 2009 that number spiked up to $70 million.

Should the city go into bankruptcy, the commissioners and their politics would no longer be in charge of city finances, the judge would be.

[Sarnoff] "You no longer have 5 people making political solutions. You now have one person who is looking after the best interest of the taxpayer of the city of Miami, without any politics getting into his or her way."

The Judge could order union contracts be renegotiated. He or she could decide what creditors get paid or not get paid.
....
Commissioner Sarnoff offers 3 options to avoid bankruptcy.

1. Renegotiate those union contracts
2. Layoff about 800 city workers
3. Raise your property taxes

In this economic climate that last option is not likely at all
.....

I see no indication Los Angeles is about to declare bankruptcy anytime soon as Sarnoff suggests. However, it is perfectly clear that Los Angeles is indeed in pathetic shape and bankruptcy is the best option.

The same applies to Houston and many other large cities as well. I look forward to the day one of these big cities finally tells their public unions where to go.

All it takes is one big city to start the ball rolling.

New Jersey Careening `Toward Becoming Greece' as Costs Rise

Inquiring minds are reading New Jersey Careening `Toward Becoming Greece' as Costs Rise, Christie Says http://preview.bloomberg.com/news/2010- ... -says.html

New Jersey Governor Chris Christie said the state is “careening our way toward becoming Greeceâ€