A California law in its first test at forestalling municipal bankruptcies is unlikely to prevent Stockton from becoming the largest U.S. city to seek protection from creditors, according to officials of two employee unions.
The agricultural center of 290,000 has been in talks on its debts with the unions and others even as Wells Fargo & Co. (WFC) seized control of a downtown building that Stockton bought with $40.8 million in bonds for a new city hall. The city missed a payment of $197,280 in April, according to a regulatory filing.
The law that took effect this year requires cities to pursue mediation or declare a fiscal emergency before seeking bankruptcy court protection. Two of the biggest U.S. municipal bankruptcies have been in California: Orange County, in 1994, and Vallejo, in 2008. Stockton’s City Council is to vote June 5 on authorizing a bankruptcy filing if the talks fail.
“I don’t see this as a bargaining tactic by the city,” Joseph Rose, the lawyer for the 385-member Stockton City Employees’ Association, said by telephone yesterday. “I do see bankruptcy as an inevitable fact of life in this process. It doesn’t have to do with tactical considerations by the city or anyone else.”
Stockton faces a $26 million deficit in the fiscal year that begins July 1. Negotiations with creditors are scheduled to end June 25, days before the deadline for reaching a balanced budget.
Bond Default
To conserve cash, the city defaulted this year on $2 million in bond payments on three downtown parking garages and the building designated as the new city hall. As a consequence, Wells Fargo took control of all four properties. Spokeswoman Elise Wilkinson didn’t respond to a phone call and an e-mail message yesterday seeking comment on the bank’s plans.
Standard & Poor’s yesterday lowered its underlying rating three levels to BB+, the first noninvestment level, from BBB+ on the Stockton Public Financing Authority’s 2005 senior-lien water revenue bonds and 2010 variable-rate water revenue bonds.
The farming and port city about 80 miles (130 kilometers) east of San Francisco is the center of a metropolitan area with a 15.5 percent unemployment rate in April. The U.S. Labor said today the national rate was 8.2 percent in May, up from 8.1 percent the previous month.
Communities and states across the U.S. face soaring costs for pensions and retiree health benefits even as revenue from sales and property taxes was depressed by the longest recession since the 1930s.
Shift in Responsibilities
The problem is especially acute in California, where total assessed property values fell 4.5 percent to $4.51 trillion last year from 2009, according to state controller data. At the same time, Governor Jerry Brown and lawmakers have shifted responsibilities such as the incarceration of certain prisoners from the state to local governments.
Stockton already has cut its workforce, imposed unpaid furlough days on employees and increased employee contributions for pensions and health care. That probably won’t be enough to avoid bankruptcy, the head of the city’s firefighter union said yesterday.
“This is real,” said Dave Macedo, president of the 173- member Stockton Professional Firefighters Local 456. “The city, outside of labor, has some serious obligations to bondholders and the banks.
‘‘They’re going to roll the dice, more than likely go to bankruptcy,’’ he said by telephone. ‘‘There don’t seem to be many other options.’’
A city spokeswoman, Connie Cochran, said the council vote on empowering the city manager to seek bankruptcy protection is meant only to keep an option open as the city races against a deadline to adopt next year’s budget.
‘‘We’re on a tight timeline,” she said by telephone. “We have to have a budget by July 1. We have to be prepared for contingencies.”
To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net
To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net
Source: www.bloomberg.com
California extends Tenant Act protections to 2019 - Housing Wire
The California legislature passed another set of bills Thursday extending protections to tenants facing eviction.
The two bills (AB 2610 and SB 1473) are the latest of the Homeowner Bill of Rights package spearheaded by democrat lawmakers and California Attorney General Kamala Harris.
Under the bills, new owners of a rental property, who bought the home in foreclosure, must give tenants 90 days notice before starting an eviction and must honor any fixed-term leases entered into before the sale.
The federal Tenant Act granted similar protections originally set to expire at the end of 2012. The Dodd-Frank Act extended the legislation through 2014.
The California bills passed Thursday would extend the protections statewide through the end of 2019.
According to a statement from Harris' office there were "incongruities within state law, and between state and federal law, regarding eviction proceedings following a foreclosure." The bills passed Thursday will align the protections.
Assemblymember Nancy Skinner, D-Berkeley, who sponsored the assembly version of the bill, said the foreclosure crisis impacted more than 200,000 California renters in 2010 alone.
The original bills at the federal and state levels forced the REO industry to look closer at who is being evicted, a homeowner or a tenant. Lawsuits against brokers and banks have grown in recent years, forcing new training to handle an occupancy status.
And enforcement may be stepping up in California. Earlier in the week, state lawmakers passed a set of bills granting more powers to AG Harris to investigate mortgage fraud and other financial crimes.
A spokesman for Gov. Jerry Brown declined to comment on whether the passed legislation will be signed.
"Tenants are unsuspecting victims in the mortgage and financial crisis," Harris said. "They pay rent on time but may suddenly find themselves forced to move. These bills will give tenants important rights and fair treatment when they live in a rental that is under threat of foreclosure."
Source: www.housingwire.com
Lansner: The exodus from California slows - msnbc.com
Mass exodus from California? Actually, the outflow is shrinking.
A report from the Tax Foundation -- the anti-tax group that's no fan of the Golden State -- shows California losing fewer folks to other states.
Tax Foundation data crunchers created a detailed database of IRS tax records back to 1993. It's designed to show movement of taxpayers from one state to another.
As the argument goes, these are the taxpaying folks creating economic value. Yet this math doesn't include those moving from other countries (a big California trend) or those not counted by Uncle Sam's tax collectors -- here illegally, or not! Caveats aside, it's a neat window into migratory patterns.
What did we see?
Overall, California's been a long-running net loser of people to other places -- but that trend has severely slowed in recent years. By the way, thanks to births and foreign immigrants California's overall population continues to grow. And it's done so for every year since at least 1900. This is not exactly what many California critics would tell you.
When you look at the Tax Foundation's count of tax returns on the move -- a decent proxy for a tally of taxpaying households -- you see California lost a net 13,804 tax-return filers to other states in 2009-10.
That's the best California migratory performance since -- and this is a curious notion -- back when the state actually gained a net 7,591 in the dot-com-fueled technology boom of 2000-01.
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See migration trends calculator from the Tax Foundation at: interactive.taxfoundation.org!
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Key to this most recent improvement? A bit of a stunner: Fewer departures -- just 218,531 in 2009-10, off 25 percent from a peak in 2005-06 and the lowest in Tax Foundation records dating to 1993. Meanwhile, arrivals from other states fell, too -- but only to the lowest in six years.
Similar trends can be found in the Tax Foundation's count of taxpayer exemptions -- a benchmark for overall population -- with California showing a net outmigration of 41,120 in 2009-10. That is off 82 percent from a peak in 2005-06 and the lowest outflow in nine years.
Again, shrinking outmigration is at work -- as exits were sliced by a third in four years to the lowest level going back until at least 1993. Similarly, Golden State arrivals from other parts of the U.S. were down -- back to 2005-06 pace of movement.
The Tax Foundation's database had a cool statistical wrinkle tallying the collective salaries in migration. Considering the aforementioned people patterns, it's little surprise that California's loss of salaries to other states is declining, too. By Tax Foundation math, $1.07 billion more in incomes left the state in 2009-10 than came in from elsewhere in the U.S. That's the smallest net loss since a 2000-01 gain.
Look, nobody wants to see our neighbors move elsewhere, but California isn't for everyone -- for reasons from economic to cultural. And while California does need some serious repair, it's rather intriguing to witness slowing outmigration -- and raw population statistics show similar trends, too -- as the state's broad fiscal picture looks murky.
For sure, nobody cut taxes in California. Or improved schools or infrastructure. Or made the state any friendlier for businesses. And recent job creation has been modest.
So I've got to guess that real estate is a key factor.
For one, home prices are way down -- and until recently, rents were languishing, too. (Not to mention the new acceptance of multigenerational living a.k.a. "Moving back in with the parents!") So the falling expense of putting a California roof over one's head may be keeping numerous folks here.
Plus, the state has a huge backlog of foreclosures-to-be -- an inventory of highly troubled California mortgages averaging 190,000 in the year ended in April, according to ForeclosureRadar.
It's a good bet that many of these financially crippled households -- don't forget other families, too, not yet in the foreclosure legal process -- are enjoying mortgage-free living by skipping the house payments. Hate California, or not -- who can pass up that sort of bargain? So why leave ... until the banks finally act?
Whether my speculation of cause is on target -- or not -- one thing's for sure: the march from California has slowed.
- Is this a profitable real estate recovery?
- Private employers added 133,000 jobs in May, ADP report says
Source: www.msnbc.msn.com
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