Phil Matier: Lessons From Detroit's Bankruptcy
SAN FRANCISCO (KCBS)— There are some lessons to be learned from Detroit's filing for bankruptcy. In recent years, California has seen cities like Vallejo and Stockton suffer similar fates.
The issues facing the Motor City's could also affect cities in the Bay Area. I think in California we're already considering ourselves out of the woods, but Detroit should serve as a reminder that the recession's affects are long lasting and are not over.
Former San Francisco Mayor Willle Brown weighed in and said that, years ago, the pay-as-you go model for municipalities and governments was pushed and that, if that were followed, cities wouldn't be in such dire financial straits. Unfortunately, that model was not embraced.
"The investment banker world sold them on the idea that you can do capital improvements over 30, 40, or 50 years and they've continued this and have been engaged in that conduct," said Brown.
It went from borrowing money to build the school or build the police station to now where they're floating bonds to pay for the pensions or to take it off the debt that they owe.
Brown said Detroit is just an outstanding example.
"We politicians are absolutely capable of doing one thing really good and that's passing on the burden on to the next politician," Brown added.
Lessons To Be Learned From Detroit's Bankruptcy
You could be a Chuck Reed down in San Jose and say, 'this is the medicine. It's bitter, but we've got to take it.' So he lays off police and crime goes up. People aren't sure if they like that model.
It takes a couple of years for people to see the effects of these types of changes. Take the current BART situation for example. BART employees are insistent that two or three years ago there was no money for raises because of the recession. Now there is surplus money and they want to be paid retroactively for what they didn't receive a few years ago.
Cities and municipalities will be able to figure out pensions, but the real stickler will be health care. It should be interesting when the Affordable Care Act kicks in at the start of the new year.
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