Monday, June 21, 2010

Cities Going Bankrupt

The headline from the Washington Post on June 21st is Downturn and Debt Swamp Cities. You can read the article here.

Cities across the country are facing the same issue - steeply declining tax revenues after the property bust are making the once unthinkable municipal bankruptcy a looming possibility. North Bay Village needs to be thinking the same thoughts right now and how to avoid it. The city still can avoid bankruptcy but it will take dedicated leadership, a stop to the petty infighting, and strong public will.

The effects of municipal bankruptcy are drastic. What happens when a municipality enters bankruptcy is that all financial decisions fall to a court appointed oversight board. The oversight board operates outside the political process and makes decisions independent of the citizens' wants. An oversight board could make the decision to end all garbage collection. The board could void the union contracts and dissolve departments. The board could sell the water and sewer operations. Our elected officials can't stop them.

Our commission would only be able to vote on matters with no financial impact, essentially reducing the agenda to plaques and commendations, code clarification, and other non essential matters. If it matters, it costs.

The reality of North Bay Village is that we are not on anyone's radar. No state or federal representative depends on our votes to remain in office and North Bay Village already has a bad reputation. North Bay Village would be the perfect city to make an example of.

A large part of the current crisis has to do with the "balanced budget" movement over the last two decades. Simply described, as government was borrowing more and more to run day to day operations, and continued to create unfunded mandates, a bipartisan concern that spending was out of control took center stage in the 1990's and is now coming back.

The balanced budget movement broke down roughly into two camps. The "pay as you go" crowd who hold the position that if the government doesn't have the money on hand, the government can't spend the money. The other group takes a little longer view and allows for government borrowing (deficit spending) as long as it is within a realistic range, that is that there is strong reason to believe that the money can be paid when revenues are back on track.

In Florida, the first view won out. Florida is a "pay as you go" state. When a city in Florida can't meet its current obligations with cash on hand, it's bankrupt. The courts take over.

For some, that may seem like a reasonable idea. I often hear people tell me that the "city needs to run like a business." but cities have restrictions that businesses don't. North Bay Village can't lay off a group of citizens. North Bay Village can't downsize our assets. North Bay Village can't borrow its way through a short term crisis.

North Bay Village is stuck right now with a fiscal crisis looming and needs to take action now, and not half hearted action.

Our commission should be holding emergency meetings to detail out the expectations to the city manager on how the budget process should proceed. The city management should be working full time on creating the full range of scenarios on how to avoid bankruptcy. Citizens need to show up and demand answers. The web page should be hosting forums soliciting ideas. We need to ask our county and state officials for help on how to approach this.

This is not going away.

Kevin Vericker
June 21, 2010

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