Wednesday, June 10, 2009

Oakland, CA mulls bankruptcy option

From the San Francisco Chronicle:
Even though city officials would prefer to avoid a public conversation, behind closed doors the Oakland City Council has discussed filing for bankruptcy protection in the midst of a $100 million budget deficit.

"We have asked the (bankruptcy) question because we wanted to know the impact," said District 5 council member Ignacio De La Fuente. "In closed session, the question has been asked, and an answer was given." He would not elaborate.

"It's a possibility," he acknowledged. "Things are that bad."

Council President Jane Brunner was equally aloof. She ably acknowledged the city's dire financial problem while managing to avoid the b-word altogether.

"We're going to try to avoid it, but am I going to say it would never happen? I can't say that," Brunner said.

Consider the city's cash position: Out of next year's general fund of approximately $415 million, police costs are estimated at $212 million, fire protection service $103 million and $41 million in debt service payments. That leaves about $60 million to pay for everything else, from library services to recreation centers to public works. ...

Article here. Out of a $415 million budget, police and fire department costs consume a whopping $315 million, or 76% of the entire budget! And compounding the city's budget woes is a 4% raise for police officers slated to kick in on July 1st. Add in another 10% of the budget for interest payments on municipal debt, and that leaves only $59 million, or 14%, for everything else. No wonder Oakland's in a world of hurt.

Oh, and tax revenues are plummeting with the bad economy, so expect the budget hole to get a lot worse as the year progresses. I'll bet we see this scenario begin to play out in cities across the country, with California leading the way.

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