logo

California City of Atwater Bankruptcy Imminent

image
Author: Bob Morris
Created: 29 September, 2012
Updated: 17 October, 2022
2 min read
Credit: commons.wikimedia.org

The primarily agricultural city of Atwater in California's Central Valley will almost certainly be the fourth California city to file for bankruptcy this year. The process leading to an Atwater bankruptcy filing begins on Oct. 3, when the city council will vote on whether or not to O.K. a fiscal emergency declaration. The expected "yes" vote will allow Atwater, which has a population of 28,000, to follow San Bernardino, Stockton, and Mammoth Lakes into bankruptcy.

The city has little choice given its $3.3 million deficit and probable insolvency by the end of the year. In addition, Atwater is carrying $95 million in bond debt. Median home values have dropped 60% since 2007. Unemployment is over 20%. "We are in a tough spot. All I can say, sir, is keep us in your prayers. We will need it," says Mayor Joan Faul. Their perilous financial situation worsened when the State of California stopped funding redevelopment for cities. Atwater has fired 30% of its employees and may fire one-third more, which would leave about 56 city workers remaining, compared to 120 in 2008.

Atwater is hardly alone in its unfortunate circumstances. Credit rating agency Moody's predicts more California cities will go bankrupt and plans "a wide-ranging review of municipal finances in California because of what it sees as a growing threat of city bankruptcies and bond defaults." This could lead Moody's to downgrade ratings for distressed cities, which would increase their borrowing costs at precisely the time when they can least afford it.

While individual circumstances certainly vary by city, the causes of their financial collapse are usually similar. Revenues and spending soared during the real estate boom. Cities borrowed to finance redevelopment and received money for such projects directly from the state. The driving wheel of their local economies became real estate and, aside from this, cities often lacked an established financial base. They also hired new employees, increasing the amount owed for public pensions.

Then, the real estate bubble burst. Real estate development slowed dramatically or stopped. Property tax revenues dropped precipitously. Unemployment rose. Cities began laying off workers and wondering how they would make bond and pension payments.

Atwater found itself reeling from the real estate collapse. Now, the city's financial devastation is threatening its ability to provide essential services. Law enforcement, fire departments, water and sewage treatment, and road repairs all need adequate levels of financing or else a city will degenerate, causing people to move away, and prolongated recovery.

Phil Batchelor, former interim city manager of Vallejo, California, which declared bankruptcy in 2008, recently spoke to NPR about what it really means for a city to default. He emphasized that filing for bankruptcy is not a "get out of jail free card," but rather buys time and brings people together from all corners of the community.  If Atwater takes anything away from Vallejo's experience, its that patience and alliances that transcend partisanship can rebuild and revive.

 

IVP Existence Banner

 

Latest articles

votes
Wyoming Purges Nearly 30% of Its Voters from Registration Rolls
It is not uncommon for a state to clean out its voter rolls every couple of years -- especially to r...
27 March, 2024
-
1 min read
ballot box
The Next Big Win in Better Election Reform Could Come Where Voters Least Expect
Idaho isn't a state that gets much attention when people talk about politics in the US. However, this could change in 2024 if Idahoans for Open Primaries and their allies are successful with their proposed initiative....
21 March, 2024
-
3 min read
Courts
Why Do We Accept Partisanship in Judicial Elections?
The AP headline reads, "Ohio primary: Open seat on state supreme court could flip partisan control." This immediately should raise a red flag for voters, and not because of who may benefit but over a question too often ignored....
19 March, 2024
-
9 min read
Nick Troiano
Virtual Discussion: The Primary Solution with Unite America's Nick Troiano
In the latest virtual discussion from Open Primaries, the group's president, John Opdycke, sat down ...
19 March, 2024
-
1 min read
Sinema
Sinema's Exit Could Be Bad News for Democrats -- Here's Why
To many, the 2024 presidential primary has been like the movie Titanic - overly long and ending in a disaster we all saw coming from the start. After months of campaigning and five televised primary debates, Americans are now faced with a rematch between two candidates polling shows a majority of them didn’t want....
19 March, 2024
-
7 min read