2010 May 30 Sunday
Miami And Antioch Headed For Bankruptcy?

An NBC Miami news video reports that Marc Sarnoff, a commissioner in Miami's government, is pondering the possibility of bankruptcy for the city of Miami. He does not think elected officials can make the decisions needed (primarily take on the public employees unions) to get the city's finances back in balance. He says they either need to renegotiate union contracts or lay off 800 employees. He does not think the voters will accept tax increases.

Sarnoff sounds like he's lost his faith in democracy: "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." One of the results of so many local governments falling under the heavy influence of public employee unions is this loss of faith in democracy as a way to run governments. Our voters are, for the most part, too dumb to see that the election advertisements run by fire, police, and other public employee unions amount to (quite successful) attempts to trick the voters into lowering their own living standards in order to raise the living standards of government employees.

In Miama the average city employee makes $76k per year versus the average Miami resident making only $29k per year. The ruling class definitely knows how to feed itself. Pension costs have rising from $16 million in 2000 to $70 million in 2009. With a population of about 390k that works out to city government pension costs of about $180 per capita. Those costs will rise as more employees retire.

20% of city property taxes will go to retirees this year. The city is trying to modify its contract with the firefighters' union and they are fighting it in court. Click thru and read the details. These stories show you what you'll eventually see closer to home.

At the end of this budget year, Miami will have to shell out more than $100 million to make the city's pensions whole. That means 20 cents of every dollar Miami takes in from property taxes goes to the retirement of city workers.

Antioch California also joins the list of municipal bankruptcy candidates. Vallejo led the way. Antioch might follow.

Antioch's leaders earlier this month said bankruptcy could be an option for the cash-strapped city of roughly 100,000 on the eastern fringe of the San Francisco Bay area.

Some other local governments are at much higher risk of going bankrupt. Detroit is on that list. I am surprised it has avoided bankruptcy for this long. Harrisburg PA is probably going under due to some bad infrastructure investment decisions. Jefferson County Alabama is in similar straits. But these 3 aren't typical of the new breed of failing governments. The new breed is in trouble mainly due to fat union retirement benefits combined with the bursting of the real estate bubble.

This is just a trickle before the flood. At bad as city, county, and state finances are now (and they are pretty bad) once world oil production starts declining each year any government already remotely near bankruptcy will get shoved hard into insolvency.

Some retired public employees are in fat city.

At his office in Burbank, Calif., Richman navigates to his group's Web site, where he's posted a list of retired public employees in California who receive six-figure pensions. Number one is Bruce Malkenhorst, a retired city manager near Los Angeles who collects a half-million dollars a year. Next on the list is Joaquin Fuster, who gets $296,000. And James Stahl, who was with the Los Angeles County Sanitation District, receives $265,000.

There are more than 5,000 Californians on this list. These six-figure pensions make up only one percent of retired public workers, but many others still have a sweet deal. Take cops and firefighters, for example: If they retire, say, after 30 years of service, they make 90 percent of their top salary each year guaranteed until they die.

Update: The governor of New York doesn't appear to have what it takes to go up against the NY state government employee unions. This illustrates why states need Congress to pass laws regulating state-level bankruptcy. Elected officials are too weak and lame to responsibly handle state finances.

Its Apr. 1 budget deadline long past, New York's dysfunctional legislature remains divided over a $9.2 billion deficit. Democratic Governor David Paterson says he's "virulently opposed" to issuing new debt to close the gap, though he may cave in the face of resistance from public sector unions to education and health-care cuts.

Share |      By Randall Parker at 2010 May 30 03:19 PM  Economics Sovereign Crises

Big bill said at May 30, 2010 3:39 PM:

Miami is a third world cesspit. Hispanics have turned it into a carbon copy of all the hellholes they created throughout the third world. And Sarnoff thinks the last gentile employees should now work for peanuts like Mexican municipal employees and top up their salaries in the traditional Hispanic way: mordida.

I admit that American-size salaries cannot be paid by the third worlders Sarnoff and friends have installed in Miami in the last fifty years, but the answer surely isn't replacing them with your typical corrupt south-of-the-border Policia Juan or Manuel. Must we go that final step?

Mercer said at May 30, 2010 4:36 PM:

An editorial that points out the budget situations of the two biggest DC suburbs. One is in a state with strong public employee unions rights.


Randall Parker said at May 31, 2010 10:41 AM:

Mercer, Great editorial. The Washington Post editors clearly realize the disaster that has come from public employee unions. Time to outlaw them.

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