Miami Commissioner Says Bankruptcy is City&#39;s Best Hope; Chris Christie Says New Jersey Careens Towards Becoming Greece

I keep waiting for some large city for some large city to take initiative and declare bankruptcy to escape onerous burden of public pensions. Perhaps Miami is that city.

NBC Miami reports Miami Budget Begging for Bankruptcy

Please click on the above link to see a very interesting video. The video is not embeddable.

Partial Transcript

The city of Miami is in such financial dire straits that commissioner Marc Sarnoff is using the "B" word, bankruptcy.

"We are not the only city, municipality to be going through this. It looks like Los Angeles sometime next week or the week after will be going bankrupt. It looks like there will be 30 more cities following suit."

Increases in public worker salaries is one of the main reasons why the budget is so tight. The average salary for a Miami city employee is $76,000. The average salary for a Miami city resident is $29,000.

Employee pensions are choking the budget too. In 2000, pension payouts cost taxpayers $16 million. In 2009 that number spiked up to $70 million.

Should the city go into bankruptcy, the commissioners and their politics would no longer be in charge of city finances, the judge would be.

[Sarnoff] "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."

The Judge could order union contracts be renegotiated. He or she could decide what creditors get paid or not get paid.

....

Commissioner Sarnoff offers 3 options to avoid bankruptcy.

1. Renegotiate those union contracts
2. Layoff about 800 city workers
3. Raise your property taxes

In this economic climate that last option is not likely at all

.....

I see no indication Los Angeles is about to declare bankruptcy anytime soon as Sarnoff suggests. However, it is perfectly clear that Los Angeles is indeed in pathetic shape and bankruptcy is the best option.

The same applies to Houston and many other large cities as well. I look forward to the day one of these big cities finally tells their public unions where to go.

All it takes is one big city to start the ball rolling.

New Jersey Careening `Toward Becoming Greece' as Costs Rise

Inquiring minds are reading New Jersey Careening `Toward Becoming Greece' as Costs Rise, Christie Says

New Jersey Governor Chris Christie said the state is ?careening our way toward becoming Greece? and can?t afford the cost of benefits and pensions for current workers.

The governor, speaking today to members of the Manhattan Institute, said his state must reduce its tax burden and control government spending. He has proposed a constitutional amendment to cap growth in property taxes, the main source of funding for schools and towns, at 2.5 percent a year.

?Higher taxes are not going to solve the problem,? said Christie, a Republican who took office Jan. 19. ?We?ve got to change the course.?

New Jersey, like Greece, has a high proportion of public workers who have been entitled to benefits such as free health insurance that outstrip taxpayers? ability to pay for them, Christie said. In the past decade the state added 11,000 public- sector jobs as it lost more than 120,000 private positions, he said.

Politicians in New Jersey have bowed to public unions for too long, failing to cut teacher benefits and enacting civil- service laws that have tied governments? hands in trimming workforces, Christie said. Over the last decade, municipal spending has grown by 69 percent, and property taxes have climbed by 70 percent, according to the governor?s office.

The average New Jersey household paid $7,281 in property taxes last year, the highest rate in the nation, according to the state Department of Community Affairs.

Senate Budget Committee Chairman Paul Sarlo, a Democrat from Wood-Ridge, proves he is mathematically challenged and unfit for office by stating "The governor?s spending cuts may lead to property-tax increases of as much as 8 percent next year".

I salute Chris Christie. We desperately need more governors to follow his lead. I also salute commissioner Marc Sarnoff. Bankruptcy is the only option that makes any sense for Miami.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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