California Screaming As 4th Muni Bankruptcy Looms in Atwater

Tyler Durden's picture

Whether Atwater, California will join the prodigious ranks of Stockton, San Bernardino, and Mammoth Lakes to become the 4th Muni bankruptcy is up for vote on October 3rd (before a $2mm bond payment in November). As Bloomberg notes, the 28,000-strong Merced county town is suffering under the same weight of public employee costs, lost revenue, and a stagnant economy leaving it with a $3.3 million budget deficit. While some put their hope in the FB IPO, perhaps Bernanke should have mandated investment in AAPL for all these municipal comptrollers? The median income is 19% below the national average as the foreclosure crisis - which saw Atwater's median home price drop by more than half - has depleted property-tax revenues dramatically. "We just started negotiating with our unions and they are going to have to take a major cut," Mayor Joan Faul said. "We hope that once we declare a fiscal emergency, that they will realize that we are definitely in an emergency. If they want to save all the jobs, everyone is going to have to take a cut,"


Via Bloomberg Briefs:

Atwater, California, is going broke under the weight of public employee costs, lost revenue and a stagnant economy, pushing it toward becoming the state’s fourth city to seek bankruptcy protection. The city of 28,000, situated among Merced County’s dairies and almond groves about 100 miles southeast of San Francisco, has a $3.3 million deficit that may leave it insolvent before year’s end, according to budget documents.


Atwater’s City Council is set to vote Oct. 3 on a fiscal emergency declaration that would permit it to follow other California cities – Stockton, San Bernardino and Mammoth Lakes – into bankruptcy court. Across the state, the recession and the foreclosure crisis have depleted property-tax revenue at the same time municipalities are burdened with rising costs including pensions.




The median household income in 2010 was $42,226, 19 percent below the national average of $51,914. Almost a fourth of the population is considered below the poverty line, compared with 13.7 percent statewide, according to U.S. Census figures.


The housing crash cut Atwater’s median home price by more than half, to $140,000 in the fiscal year that ended in June from $336,000 in the same period in 2007. Unemployment surged to 21 percent. That helped send the city’s tax revenue plummeting more than one-fifth since 2007.




Under labor contracts, the city pays all of an employee’s 8 percent mandatory contribution for pension costs and 7 percentage points of the 9 percent for police and firefighters. Health-care premiums increased by 15 percent in 2011 and are forecast to jump 10 percent next year.


To help balance the books, Atwater has mostly depleted its cash reserves, fired 30 percent of its 120 workers since 2008 and may need to trim another third, Faul said. The city is in talks with unions for concessions from police officers and rank-and-file city workers, Faul said.


“We just started negotiating with our unions and they are going to have to take a major cut,’’ Faul said. “We hope that once we declare a fiscal emergency, that they will realize that we are definitely in an emergency. If they want to save all the jobs, everyone is going to have to take a cut,’’ she continued.


To make matters worse, the city is facing a $2 million payment on bonds in November, according to the budget documents.


Standard and Poor’s lowered its underlying rating on the Atwater Public Financing Authority’s wastewater revenue bonds to BBB- from A on Sept. 24, citing the city’s potential move toward bankruptcy.


Under a law signed by Brown last year, cities seeking bankruptcy protection must first declare a fiscal emergency or hold talks with creditors through a mediator. Municipalities can file for court protection if mediation doesn’t bring a resolution in 60 days or if the city runs out of money. The law was sought by unions after Vallejo went bankrupt in 2008 and asked a court to help it void labor contracts.

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icanhasbailout's picture

Free Meredith Whitney!

GetZeeGold's picture



No problem.....Moonbeam Jerry will save us.


Meredith Whitney is free to go....just as soon as you give us Jon Corzine.


MillionDollarBonus_'s picture

Doomer ZHers couldn't be more wrong about muni bonds. Our Federal government and Federal Reserve have made a solid commitment to keep rates low for an extended period, and nowhere did they exclude muni bonds from that pledge. The 30 year treasury yield sits at a phenomenal 2.81%, and the yields on California munis are set to plummet in line with this benchmark. There is fundamentally no difference between the full faith and credit of our congress, and the full faith and credit of our state leaders. They are both equally trustworthy and competent, and Muni bond yields will reflect this fact, regardless of the doomer hypothesizing on this site. 

Pladizow's picture

Dont feed the Troll!

No negative, No positive, No comments!

JPM Hater001's picture

"We hope that once we declare a fiscal emergency, that they will realize that we are definitely in an emergency."

Is this MDB's home town? 

Keep hoping people will come to reality.  Ive been hoping for 3 years. 

Still nothing.

12ToothAssassin's picture

So you cut 30% of the city employees and now are looking at cutting another 30%. At what point are there a negative number of employees not puting in enough money to fund the pensions?

MisterMousePotato's picture

I'd bet dollars to donuts that no public union employee was actually "fired." No, they take out their list of positions, and strike out a bunch that are currently unfilled. ("See? We've eliminated a bunch of positions.") And, public employee retires, but no one is hired to fill their position, as in the past. (Funny how no one notices/cares that they're gone.)

Not the same as firing.

All in the name of fooling the credible that our precious public employee overlords, too, are facing hard times and making sacrifices just like the rest of us.

TruthInSunshine's picture

I just had a conversation with the man yesterday afternoon, who informed me that an ugly rain is about to set in, as many more municipalities run out of dry powder by which they can delay having to tell municipal workers that municipal bankruptcy really is a viable option unless massive wage & benefit concessions, along with significant head count reductions, aren't obtained.

Dead Canary's picture

Hey, I like Million Dollar Brainless.

TheCanadianAustrian's picture

For the love of god, get a sense of humor.

EscapeKey's picture

There is fundamentally no difference between the full faith and credit of our congress, and the full faith and credit of our state leaders.

...except this whole munis filing for bankruptcy, I guess.

Oh well, no doubt coming to a state near yours, to be followed by sovereign defaults.

Clashfan's picture

On another note, GW and Banzai are both featured/mentioned in the latest Max Keiser show:!

NotApplicable's picture

Max Keiser is either controlled dissent, extremely ignorant, or some combination of the two.

He is just another faux Pied Piper who sings the song of taking on Wall St., all while denigrating its only true, coherent opposition (Austrian Economics).

Unless he starts acting like an adult in the case of Tom Woods (which doesn't seem likely), he's the classic example of Stalin's "useful idiot." (or what I call "self-propelled tools")

Clashfan's picture

This may be--or not.

Not everyone who disagrees with the Austrians does so as a result of conspiracy, believe it or not.

A lot of people say the same stuff about Alex Jones. Not everyone who disbelieves that "the Jews" run everything is a shill for them, either.

I do not know if Max fits this bill or not, but he (like Alex Jones) presents a lot of good, useful information.

There are good, logical cases against Hayek and the Austrians, too.

Beware of the "either or" fallacy--false dilemma. You are saying that one either has to support the Austrians' theories or that that person is a shill or "useful idiot." Until I see more info, I don't buy it.

ronaldawg's picture

I wrote about Max Keiser on this site yesterday - on my watching of - all he does is rail against wealth and the 1%.  He never gives any opinion on how should the economy be run, what he would do.  Isn't he one of the 1% - I can't believe he is living in a cardboard box somewhere....

I think most readers/commenters at Zerohedge would answer that question "give us real capitalism" not the phony Obama corporate cronyism we have now.

toady's picture

The City of Glendale is looking to jump on the default bandwagon here in AZ.

They built just short of a billion worth of football & hockey arenas and now they can't pay for them. They're talking about pulling a Camden and laying off their police force, so I imagine defaulting is next...

blunderdog's picture

Well at least it's not "socialism" sinking Glendale.

Superbowl 2015!

toady's picture

Yep. At least they got a couple of nice buildings out of it.

Bay of Pigs's picture

"pulling a Camden"

New buzzword all across 'Mericka......FUCK YEAH!

greyghost's picture

no no people are not reading the story line as presented " IT IS ALL ABOUT THE WORKER BEES IT IS ALL THEIR FAULT"!!!!!! has nothing to do with crony goverment projects, for crony local business.....never, never, never!

Uncle Remus's picture

Hey, you've still got Sheriff Joe! Isn't Glendale boxed in these days? Just chase them over the city line.

Then again, there's Maryvale...

toady's picture

That's what they are saying. Sheriff Joe is the county sheriff, so technically he is responsible for the entire area, including Glendale. The sheriff already provides police services to unincorporated areas, so they throw substantially less money than they pay the city cops to the sheriff, and POOF, all the police union obligations go out the window.

Shevva's picture

Tractor factory jobs for all union works.

Statues of your illustrious leaders on every street corner

And the HSA (Happy Security Authority) to beat those that don’t smile from ear to ear when walking down the street.

toady's picture

The beatings will continue until moral improves.

Al Huxley's picture

Well, you're definitely spot on with the 'equally trustworthy and competent' part.

Defiant1968's picture

I agree - finally someone with some common sense around here


Overfed's picture

That's some funny shit, I don't care who ya' are!

cranky-old-geezer's picture



There is fundamentally no difference between the full faith and credit of our congress, and the full faith and credit of our state leaders.

Then why are munis bankrupting moron?

atomicwasted's picture

At least Jerry Brown dismantled the $1 billion/year "redevelopment agencies," which were just ways to funnel tax money to politically-connected developers.  It's more government shrinkage - the actual abolition of government agencies - then Schwarzenegger or Wilson ever managed.

NotApplicable's picture

It's not like he had much of a choice, as his predecessors burned up all of the available stalling time.

Well, I guess he could always go full retard, and pretend his IOUs are both infinite and valuable.

My guess is that soon after the re-selection all supports will be removed so that everything comes crashing down (except prices for necessities), and Uncle Ben will start bailing out the states directly, ending once and for all the idea of any state having any degree of independence from DC control.

Not that they aren't that way already (see unemployment insurance "loans"), but it's about to get much, much larger (ala Johnson's "Great Society").

Almost Solvent's picture

If this happens, it will be fun to watch states like Texas, Florida, Wisconsin, Nevada, etc. with Red-Team governors bend over and receive the full Bennie penetration up the poop shoot along with their Blue-Team sister states.

Then maybe some folks that think there is any real difference between Red-Team / Blue-Team will awake from their slumber when everyone is getting the Bennie fist.

LoneCapitalist's picture

If you dont think there is any difference between the way states like Texas and Wisconsin are run and the way the rest of the country is run, you need to pay more attention.

Almost Solvent's picture

That was not my point, my point was that if the Feds are going to send Bennie bucks into the states as the comment above stated, then eveyone gets to see the charade for what it is exactly because it does not matter how the state is run. Every state would get the Bennie injection.

thanks for the downgrade btw

Son of Loki's picture

California lifeguards making over $200,000 per year + multi-million dollar pensions....

They deserve to go broke.



Ar-Pharazôn's picture

this is the first comment on this video:

"I was wondering where your numbers came from? I checked? the Newport Beach city proposed budget for 2011-2012 and the amount paid to the lifeguards are far less than your numbers"

I m just saying.

Dr. Richard Head's picture

We need a new Community Reinvestment Act.  /sarc

Comay Mierda's picture

wait til QE4.  Benny boy will be buying munis in CA and IL, then the rest of the broke states of amerika

BooMushroom's picture

Think he will finish monetizing all the MBS's first, or jump in when the muni bankruptcies become a once a week affair?

Dr. Richard Head's picture

I don't believe he is buying the actual MBS, but the rehypothicated CDOs based on the MBS that are based on market-to-model values. 

Big Swinging Richard's picture

So many Kalifornians are moving to Oregon and spreading their terminal disease of liberalism, I'm afraid there's not much time left here.  Release the kraken and take that sh!thole of a state down!

insanelysane's picture

Same thing happened to New Hampshire.  Mass-holes moved north for the low taxes and then raised property taxes and fees through the roof.

odatruf's picture

insanely - you are wrong about that.  The towns that have seen the greatest population migration from Mass - along the border and up the I-93 and Rt. 3 triangle, have seen their politics become more and more conservative.

People who fled Mass are self-selecting and are precisely those who despise the People's Republic and its taxes and stupid rules.

On the other hand, those who have moved into the Upper Valley and all along the Connecticut River, have turned those towns more and more liberal.

While I don't adhere to the red = good; blue = bad binary, it is a pretty good proxy in this case.



NotApplicable's picture

How do they manage to live in a state that openly worships Nike?

Or do they drink that flavor of Kool-Aid ("Progressive Sweatshops, Good!") too?

Big Swinging Richard's picture

#Not, actually, I worked at the Swoosh for a while.  Most sheep on campus are not fully aware of the supply chain and how employing cheap Asian labor fits into the model.  The whole environment over there is seductive, lots of glam working with athletes and all.

greyghost's picture

 I just have to laugh anymore about the hit pieces by the likes of bloomberg, fox news and fox business. every article like this always starts with the " pension and labor costs" and never never goes into the blackhole/white elephant pet projects for mayors or local business....never. living just down the road from  san bernardino ca. and their great 17 year regional airport project, a project that has sucked aprox. 700/800 million taxpayer dollars down that blackhole for an airport that has no commercial aircraft business after 17 years. yep, always the worker bees' fault isn't it? hell these morons running san bernardino even went so far as to hire an airport mangement company, a company owned and run by a man that the FAA had banned from the aviation business for corruption! so this management co. then gives the fuel contract to another company that is owned by the same person banned by the FAA!!!! yep, you guessed it, now the fuel company owes the regional airport[taxpayers] over 100 million dollars for fuel!!! but bloomberg, fox news and fox business want you to know that "it is all about pension and labor costs and all the worker bees fault." if these so called "news" networks spent just half the energy talking about the corruption "everywhere" than maybe we could start to correct some serious problems!