http://www.zerohedge.

com/news/2012-09-26/california-screaming-4th-muni-bankruptcy-looms-
atwater

California Screaming As 4th Muni Bankruptcy

Looms in Atwater

Submitted by Tyler Durden on 09/26/2012 10:31 -0400

 Ben Bernanke
 Bond
 Budget Deficit
 Creditors
 Recession
 Tax Revenue
 Unemployment

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.