Which CITY and which STATE will be the First to Default?

[Spectrism]

Cities and states are unable to print money like the federal government.

As the federal government is limited in future debt (unless the federal reserve intervenes separately) there will not be bailouts for the states.

Who is your guess of city, state and when the first defaults will be?

My guess-

Chicago Feb 10, 2012

Illinois April 4, 2012

[Shami-Amourae]

States are allowed to default?

[Ares]

Sacramento, California.

No idea on what year it will happen though.

[Shami-Amourae]

My guess is some minor city in California that's 95% illegal aliens, sort of like Bell, California.

[Libertytree]

I don't know if RI will be the 1st state to go down but this doesn't look good.

The city of Central Falls, Rhode Island says they are so broke they had to give their retirees a dreaded ultimatum — give up 50% of your pension or risk losing it all.

http://www.nytimes.com/2011/07/12/business/central-falls-ri-faces-bankruptcy-over-pension-promises.html?_r=1&pagewanted=all

The small city of Central Falls, R.I., appears to be headed for a rare municipal bankruptcy filing, and state officials are rushing to keep its woes from overwhelming the struggling state.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers’ pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.



“Time is running out,” warns Robert G. Flanders, the state-appointed receiver, who recently closed the public library and a community center to save money. He has no power to cancel the city’s contracts with workers, so instead he has begun approaching retired police officers and firefighters with what he describes as “the Big Ask”: will they voluntarily accept smaller benefits in the name of saving Central Falls?



Some of the retirees are in their 90s, and Central Falls, like many American cities, has not placed its police and firefighters in Social Security (http://topics.nytimes.com/top/reference/timestopics/subjects/s/social_security_us/index.html?inline=nyt-classifier). Many have no other benefits to fall back on.



State lawmakers are trying to contain the damage, mindful that it would be a bad time for any state to seek help in Washington. Last month they rescinded an offer of state aid to Central Falls, just after Moody’s downgraded the city’s credit to “possibility of default.”



But the state still has risks related to the woes of its municipalities, risks that have gone largely unnoticed because it is not as big as, say, Illinois and California. Several other Rhode Island cities are sinking under big debt burdens. Even Providence, the capital, risks running out of cash in September, according to its auditor, and if it scrapes by until October, it must then come up with $60 million for its own municipal pension plan.



Some analysts fear that a Central Falls bankruptcy, and a whiff of other problems out there, could scare nervous investors away from bonds issued by Rhode Island’s other municipalities, perhaps setting off a chain reaction that could push the state itself to the brink. There is a precedent: the last American state to default on its bonds, Arkansas in 1933, got in over its head by trying to help struggling municipalities.



More recently, when local governments have veered toward bankruptcy — Orange County, Calif., in 1994; Cleveland in 1978 — neighboring municipalities have found it harder to sell their own debt. During the New York City fiscal crisis of 1975, New Jersey suddenly found its bonds harder to sell.



“That type of contagion is what you’re trying to avoid,” said James E. Spiotto, a bankruptcy specialist at the law firm Chapman & Cutler, who is not involved in Rhode Island’s problems.



Rhode Island has an investment-grade credit rating, but it is in no position to bail out a string of teetering cities, or take over their shaky local pension funds the way the federal government does when some companies go bankrupt. The state treasurer, Gina M. Raimondo, says Rhode Island must first stabilize its own pension fund, which continues to require more and more cash each year, despite four overhauls since 2005 that were supposed to get the cost under control. The Securities and Exchange Commission is investigating. If the state turns out to have understated its commitments, it could deliver a new jolt to bond markets still nervous after two traumatic years.



Lawmakers in Rhode Island are trying to reassure investors. On July 1 they passed a law giving certain bonds, known as general obligations, legal priority over all other payments that municipalities must make, including retirement benefits. The measure, awaiting Gov. Lincoln Chafee’s signature, also requires Rhode Island’s cities, towns and districts to dedicate their general revenue to paying bondholders first, and to raise property taxes as much as necessary to make all payments to bondholders on time.



It gives less secure types of bonds priority, too, and makes local officials personally liable for any losses they cause by failing to comply with the new requirements.
When the city of Vallejo, Calif., declared bankruptcy in 2008 (http://www.nytimes.com/2008/05/08/us/08bankrupt.html), no one thought it would ripple out over the whole state. Partly that’s because California has shock absorbers: laws on the books that assure bondholders they will be paid and a big, diverse state economy that could bail out a distressed city if need be.



Rhode Island is different. There are only 39 cities and towns in the state, so one troubled city cannot easily fade into the background. And there is not just one troubled city. Recent tests found one in four in some degree of distress.
A startling number have stumbled by trying to operate their own tiny pension funds for selected groups of workers, rather than participating in a state-run pension system for municipalities. There are 36 of these local pension funds, and 23 have been designated at risk, with Central Falls the most endangered. A legislative report found that eliminating all their shortfalls would cost more than the total statewide property tax levy.



In Central Falls, the receiver looked into whether the state-run pension system for municipalities could take over the local plan, but found that a radical restructuring would have to come first.



The city, just north of Providence, is small and poor, but over the years it has promised police officers and firefighters retirement benefits like those offered in big, rich states like California and New York. These uniformed workers can retire after just 20 years of service, receive free health care in retirement, and qualify for full disability pensions when only partly disabled.



Just over one square mile, Central Falls has a tightly packed population, filled mostly with immigrant families, that struggles on a median household income of less than $33,520 a year, according to the Census Bureau’s 2005-9 American Community Survey. The typical single-family house, after a recent revaluation, is worth about $130,000. It is hard to see how anyone thought such an impoverished tax base could come up with an additional $80 million for retirement benefits. If the city were contributing the recommended amount to the plan each year, it would take 57 percent of local property tax revenue.



Daniel L. Beardsley Jr., executive director of the Rhode Island League of Cities and Towns, said it was not the city’s idea. Other states limit what can be decided in collective bargaining, but Rhode Island’s law says that for police and firefighters, “wages, hours and any and all terms or conditions of employment” are subject to negotiation.



“That means even the length of a mustache,” said Mr. Beardsley, who over many years has represented Central Falls and other municipalities in contract negotiations. Talks broke down more often than not, he said, and then the same state law called for binding arbitration, which for many years was a clubby process that emphasized comparable benefits all across the state more than any city’s ability to pay.



“It was a domino effect,” he said, leaving Rhode Island with the nation’s highest per capita spending for fire services and sixth-highest for policing. (The binding arbitration law does not apply to public workers other than police officers and firefighters in the state, although some want it extended to teachers.)
Central Falls is already spending about a fourth of its budget on employee benefits, and that will rise sharply when the pension fund is exhausted. Mike Andrews, president of the local firefighters’ union, said about one in four of his men now qualified for retirement, but were afraid to retire, concerned that their pensions would be chopped in bankruptcy.



“We’re always willing to come to the table and try to work something out,” he said. “We want to get this corrected as much as anyone, because if it doesn’t get corrected, we suffer.”

[palani]

I expect most of you have no idea what default actually is. Do you expect a newspaper article to come out where a state or muni has ACTUALLY declared default?

Here is how it goes ... you have a bill to some entity. You send them a notice of the bill and ask for payment. They don't respond. After the elapse of a sufficient time period you next send a notice of FAULT (just to be fair) and again ask for payment. Finally after the elapse of another period of time you send a notice of DEFAULT. This process is called administrative procedure as well as due process to the debtor.

Silence is equated with both acceptance and dishonor. YOU are the one who is required to give due process of the bill and give them final notice of default.

If you are not a creditor you do not have the standing to send the first bill.

I expect there are 8 billion entities on the face of the earth with respect to whom I am neither a creditor or a debtor. Most are real. Some are fictional. I wish them all well.

[palani]

If you would like Kansas to be the first state to default then go cruisin' the interstate in that state at 140 mph. When stopped they will give you a ticket. You charge them $10 trillion dollars for the service and send in the bill.

I will practically guarantee you could put Kansas (or any state or muni) into default within 90 days.

Not sayin' it is right or wrong just that this is how it gets done.

[Ares]

If you would like Kansas to be the first state to default then go cruisin' the interstate in that state at 140 mph. When stopped they will give you a ticket. You charge them $10 trillion dollars for the service and send in the bill.

I will practically guarantee you could put Kansas (or any state or muni) into default within 90 days.

Not sayin' it is right or wrong just that this is how it gets done.

What's to stop a judge from tossing it out under the all encompassing banner of frivolous?

[palani]

What's to stop a judge from tossing it out under the all encompassing banner of frivolous? The action cannot be "tossed aside" because the administrative process of NOTICE, FAULT and DEFAULT is the ENTIRE CASE. Default judgment has already been decided because the debtor went silent (did not respond). Why would any judicial actor involve himself in an issue that has already been decided?

[palani]

By the way, you want other creditors to know of your successful suit against the debtor. It helps to put additional pressure on the debtor to pay his bills. With this in mind take your paperwork to the clerk of court and request a lis pendens. Make thousands of copies of this document and start plastering bulletin boards , oak trees in the city square, bank lobbies and other merchants. Just to keep the debtor from going around fleecing other honest people. Open up a miscellaneous jacket in federal court (costs around $35) and make sure a copy of your paperwork goes there as well. It might be worthwhile as an evidence depository if you need to go federal.

[Ares]

By the way, you want other creditors to know of your successful suit against the debtor. It helps to put additional pressure on the debtor to pay his bills. With this in mind take your paperwork to the clerk of court and request a lis pendens. Make thousands of copies of this document and start plastering bulletin boards , oak trees in the city square, bank lobbies and other merchants. Just to keep the debtor from going around fleecing other honest people. Open up a miscellaneous jacket in federal court (costs around $35) and make sure a copy of your paperwork goes there as well. It might be worthwhile as an evidence depository if you need to go federal.

I'll keep that in mind if I ever get a speeding ticket. :D

[Son-of-Liberty]

If you would like Kansas to be the first state to default then go cruisin' the interstate in that state at 140 mph. When stopped they will give you a ticket. You charge them $10 trillion dollars for the service and send in the bill.

I will practically guarantee you could put Kansas (or any state or muni) into default within 90 days.

Not sayin' it is right or wrong just that this is how it gets done.

I'm not disagreeing with you in theory but in reality if this were possible it would have been done already. Seems simple enough and anyone with success at this on a small scale would simply increase their fee's.

[Gaillo]

I'm also going with that corrupt, rotting zombie carcass of Illinois.

City? Anyone's guess... haven't several California cities come REALLY close lately?

[gunDriller]

some CA cities & counties have already declared bankruptcy.

Orange County did about 10 years ago.

Vallejo did in the last few years.

i think California is one of the most likely ... US gov. will have a hard time supporting them ... wealthy tax base is free to leave the state ... etc.

BUT - Calif. also pays a lot more in fed. income taxes than they get back from the US gov.

sure would be interesting if they said, "we're going to keep that extra dough here in California."


in any case, i think that's where we'll be seeing some of the primary impact of the US gov. default - they won't be around to bail out states.

sure would love to see them cut off aid to Israel.

[palani]

I'm not disagreeing with you in theory but in reality if this were possible it would have been done already.

Corporations are endowed with the right to sue AND TO BE SUED.

Nowhere have I suggested that you will collect any MONEY. The point of the exercise is to prove that there is no money. It is possible, after administrative process is complete, that you might extend an offer to any other agents you might later be approached by to participate in the bankruptcy of the entity you have defaulted. After all, they all exist in the same federalized plane. If they offer you a ticket ask them "would you care to participate in the bankruptcy of ______ ?"

The more principals you care to bring in by joinder the happier you should be. At the same time you are making other persons (corporations that is) happy by giving them a choice (counteroffer) which it seems they all happily accept.

[ximmy]

Oh-oh...

BIRMINGHAM, Ala. (AP) — Alabama's largest county is laying the groundwork for filing what would be the largest municipal bankruptcy in U.S. history, over a more than $3 billion debt for its sewer system. The Jefferson County Commission approved resolutions Tuesday to hire prominent bankruptcy lawyers and to sell bonds later in case money is needed to emerge from bankruptcy. Jefferson is Alabama's most populous county and seat of Birmingham. It's been trying for three years to avoid filing bankruptcy over debt payments it can no longer afford.

[BTW... Pluck JPmorgan]

The county — Alabama's historic economic hub with some 658,000 residents — has been trying to avoid filing bankruptcy since 2008. The deal it offered last week to JPMorgan Chase and other creditors would erase more than $1 billion of its debt with the promise of repaying the remaining amount through a combination of modest sewer rate increases and loans. But lenders have yet to respond to what amounted to a last-ditch effort to avoid bankruptcy.
"The fact that we have not received a counteroffer speaks volumes to me," said Commissioner Joe Knight.
JPMorgan Chase declined comment.

http://news.yahoo.com/ala-county-readies-possible-record-bankruptcy-155646239.html

[Spectrism]

I have held that the first cities/states to have problems will get federal "free" money. We are, however, getting past that free money point because of all the giveaways Obama already committed. There is a point in debt load beyond which you cannot go without everyone completely losing confidence in the currency. We are just about there.

I also think that the core problem has not been solved by Obama's bailouts/cash for clunkers/stimulus dollars/etc... but actually have been made worse. Rather than entrepreneurs being allowed to find solutions without being taxed and hindered by needless regulations, they have been stifled. The government has shut down the source of wealth creation- which is also job creation. Less production = less jobs = less income = less taxes at state & federal level.

The government answer to less tax collections? Increase tax rates! You could not be more effective at destroying an economy if that was your real intent. It is fairly clear that the ruling powers are working hard to destroy everything of traditional value in America.

[Twisted Titan]

I was just told by the misses......there was a small mini riot at the unemployment office near camdem

apparently with the debt ceiling so close people are going to the office in droves to get answers some scuffling ensued and I think they just locked the whole place down nobody in or out

I don't think it made the papers

what. is funny is banks are serving notice they will not cash state checks unless you have the funds in your account.....check cashing places issued something similar.

The fuse is set to blow the roof off this mother.

[Spectrism]

I think this is why Timmie Geithner is pushing for this debt limit increase. They want to be able to spend unlimited amounts to keep the fuse snuffed and stop any major city or a state from going completely under. It is a matter of spreading the corrupt debt among the states (taxpayers' liability) like taking cancer out of the lungs and spreading it to all the other organs instead of destroying it.

I think the ultimate answer will be for the federal reserve (under direction of the treasury) to pump federal reserve notes into the economy, even if they are not sanctioned by treasury notes (which tie them back to national debt). There will either be a default of insufficient funds, or a default of Bernanke's funny munny falling like snow from the sky.

[Twisted Titan]

Somewhere on the forum I read that uncle sam cuts 80 million checks per month

no nation in the history of the world has amasssed a army one tenth the size of it

an no elite base can survive if that many decide to turn on you.

[osoab]

Somewhere on the forum I read that uncle sam cuts 80 million checks per month

no nation in the history of the world has amasssed a army one tenth the size of it

an no elite base can survive if that many decide to turn on you.

Obummer stated that in a speech he gave. I think it was the one from last Friday evening. I started a thread about the speech.
If I remember correctly he said 70 million checks per month.

[gunDriller]

Oh-oh...

BIRMINGHAM, Ala. (AP) — Alabama's largest county is laying the groundwork for filing what would be the largest municipal bankruptcy in U.S. history, over a more than $3 billion debt for its sewer system. The Jefferson County Commission approved resolutions Tuesday to hire prominent bankruptcy lawyers and to sell bonds later in case money is needed to emerge from bankruptcy. Jefferson is Alabama's most populous county and seat of Birmingham. It's been trying for three years to avoid filing bankruptcy over debt payments it can no longer afford.

[BTW... Pluck JPmorgan]

The county — Alabama's historic economic hub with some 658,000 residents — has been trying to avoid filing bankruptcy since 2008. The deal it offered last week to JPMorgan Chase and other creditors would erase more than $1 billion of its debt with the promise of repaying the remaining amount through a combination of modest sewer rate increases and loans. But lenders have yet to respond to what amounted to a last-ditch effort to avoid bankruptcy.
"The fact that we have not received a counteroffer speaks volumes to me," said Commissioner Joe Knight.
JPMorgan Chase declined comment.

http://news.yahoo.com/ala-county-readies-possible-record-bankruptcy-155646239.html


i believe Birmingham's $3 Billion sewer system is THAT sewer system ... the one that cost (ballpark) $300 Million.

The cost increase ... Birmingham went to Goldman Sachs (Goldmad Sucks Blood ?? ) for financing.

let me see ... WOW, that brain cell is still alive !

"In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase."
http://www.rollingstone.com/politics/news/looting-main-street-20100331

http://www.theredmountainpost.com/the-taj-mahal-of-sewer-treatment-plants-an-analysis-of-the-jefferson-county-bankruptcy-4615/
... re-post of the Rolling Stone article.


Moral of the story ... never let the money-changers help you build a sewage treatment plant.

[JDRock]

obviously the one with the most minorities.....yes it was and is and ever will be about race.

[Olmstein]

i believe Birmingham's $3 Billion sewer system is THAT sewer system ... the one that cost (ballpark) $300 Million.

The cost increase ... Birmingham went to Goldman Sachs (Goldmad Sucks Blood ?? ) for financing.

let me see ... WOW, that brain cell is still alive !

"In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase."
http://www.rollingstone.com/politics/news/looting-main-street-20100331

http://www.theredmountainpost.com/the-taj-mahal-of-sewer-treatment-plants-an-analysis-of-the-jefferson-county-bankruptcy-4615/
... re-post of the Rolling Stone article.


Moral of the story ... never let the money-changers help you build a sewage treatment plant.

If you haven't already, you should read the Rolling Stone article about this mess.

I wonder how many other cities/counties have been screwed by the money-changers, and are on their way to bankruptcy.

[Awoke]

I was just told by the misses......there was a small mini riot at the unemployment office near camdem


They're just upset because Amy Winehouse died there.

;)

[Spectrism]

We have our first WINNER!!!


I don't know if RI will be the 1st state to go down but this doesn't look good.

The city of Central Falls, Rhode Island says they are so broke they had to give their retirees a dreaded ultimatum — give up 50% of your pension or risk losing it all.

http://www.nytimes.com/2011/07/12/business/central-falls-ri-faces-bankruptcy-over-pension-promises.html?_r=1&pagewanted=all

The small city of Central Falls, R.I., appears to be headed for a rare municipal bankruptcy filing, and state officials are rushing to keep its woes from overwhelming the struggling state.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers’ pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.


http://www.zerohedge.com/news/central-falls-rhode-island-files-bankruptcy

Central Falls, Rhode Island Files For Bankruptcy


http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg (http://www.zerohedge.com/users/tyler-durden)
Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 08/01/2011 14:01


It's not Jefferson County, yet, but it could certainly be seen as the precursor to the first domino (http://www2.turnto10.com/news/2011/aug/01/17/central-falls-retirees-not-ready-accept-cuts-ar-648187/). "The state-appointed receiver overseeing the cash-strapped Rhode Island town of Central Falls has filed for bankruptcy on the city's behalf in an effort to help it get back on its feet. Receiver Robert G. Flanders and Rhode Island Gov. Lincoln Chafee announced the step - which Flanders has described as a last resort - at a news conference at City Hall. Flanders filed the legal paperwork seeking bankruptcy protection Monday. "From the ashes of bankruptcy Central Falls will rise again," Flanders said." The biggest losers: unions. "With the city now seeking bankruptcy protection, Flanders said he plans to reduce pension benefits beginning in late August. He has asked the federal court to immediately reject collective bargaining agreements. He said the next set of pension payments will reflect at least the cuts he outlined to city retirees. In addition, he said city workers will face layoffs. Flanders called the step unavoidable, as taxes have already been raised and city services have been cut "to the bone." Expect Barack Obama to thaw Steve Rattner from carbonite explain to creditors, using a variety of four letter words, that they will be last in line of payment after every single union claim has been satisfied, with the resultant husk of a town reverse merged with GM.





"We're not going with a band aid-approach," Chafee said. "We're going to tackle this and that's a positive."

Flanders said he would hope to have a plan of recovery to present to the judge at the outset of proceedings in an effort to prevent a protracted bankruptcy.

"We need to come out of this with a sustainable plan for recovery," he said last month after a meeting with retirees.

Central Falls, a city of 19,000 residents about a 15-minute drive north of Providence, has $80 million in unfunded pension and benefits obligations and $5 million deficits projected for each of the next five years. The city has found itself the subject of national headlines over its floundering finances and a high school so troubled that all its teachers were fired in one fell swoop last year, but eventually rehired.

The mayor, Charles Moreau, and City Council president, William Benson Jr., who were demoted to advisers after the state stepped in last year, have been critical of the receiver. They say it was clear long ago that bankruptcy was the only option.

"That's what we wanted to do almost a year and a half ago," Benson said Monday. "It can't be any worse than it is. It just can't."

Moreau said the city has no choice. "Unfortunately this is the route we've got to go. At the end of the day, fiscal stability is of the utmost importance," he said.

U.S. Bankruptcy Judge Frank Bailey of Massachusetts has been named the judge in the case.
And a video of the bankruptcy announcement, brought to your very, very appropriately by Mario Hilario:
(see link)

[Joe King]

I wonder how many other cities/counties have been screwed by the money-changers, and are on their way to bankruptcy.

Ummm,...perhaps all of them?