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Thread: Cities in California about to go bye-bye?

  1. #1
    Cyburbian mgk920's avatar
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    Cities in California about to go bye-bye?

    http://www.latimes.com/news/local/la...,2433019.story

    Things must be really starting to get bad there, with three already filing Chapter 9, many others pondering it and with the end-game of some potentially being outright dissolution/dis-incorporation.



    Mike

  2. #2
    Cyburbian
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    Mammoth Lakes seems to be a bit of an outlier. It's actually somewhat troubling to me that a city can be sent into bankruptcy by the courts over a single lawsuit. Stockton and San Bernardino's problems were arguably brought about by a series of bad decisions while Mammoth Lakes was just a single one. It seems kind of messed up that a whole city's population can be screwed over just like that.

    California has so many problems now that I'm not even sure how they can go about fixing them without rewriting the entire state constitution. The referendum system in particular needs to be changed. So many bad laws get passed thanks to the low threshold it takes to put something on the ballot.

  3. #3
    The Mammoth Lakes incident sounds very interesting. I'll have to read up. From what I gather, Mammoth Lakes entered into an agreement with a private developer. The agreement went sour prompting the developer to sue, successfully bankrupting the town. It's a very sad situation for the residents that lived there. Anyone have the Cliff notes on this one or a good source for additional information?

  4. #4
    Cyburbian
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    This is the article cited on Wikipedia.

    After reading it, the situation sounds even more messed up than I knew. Basically the real estate agreement involved developing their airport in a way that didn't comply with FAA regulations. The city had no choice but to back out after seeing there was no way the project could be approved. Both parties failed to do their due diligence but the city is the one who had to pay the price since they backed out first.

  5. #5
    http://ceres.ca.gov/ceqa/cases/2010/...moth_Lakes.pdf

    Defendant Town of Mammoth Lakes (the Town) entered into a development agreement with Terrence Ballas to make improvements at the Town‟s airport and to build a hotel or condominium project at the airport. Ballas would initially lease the land for the hotel/condominium project but would later have the option to purchase it. Plaintiff Mammoth Lakes Land Acquisition, LLC (Developer), later acquired from Ballas the right to build the hotel or condominium project.

    The Town eventually changed its priorities and no longer wanted the hotel/condominium project. The Town sought help from the Federal Aviation Administration (FAA) to eliminate the Developer‟s ability to build the hotel/condominium project. The FAA objected to the hotel/condominium project and threatened to cut off federal funding for the airport. However, the Developer demanded that the Town move forward with the hotel/condominium project as contemplated in the development agreement. Despite the demand, the Town refused to move forward unless the parties could resolve the FAA‟s objections.

    Claiming the Town repudiated the development agreement, the Developer sued the Town for anticipatory breach of contract. A jury found that the Town breached the development agreement and awarded $30 million in damages to the Developer. Later, the trial court awarded $2,361,130 in attorney fees to the Developer.
    I knew there was more to this story

  6. #6
    Cyburbian imaplanner's avatar
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    Quote Originally posted by Blide View post
    Mammoth Lakes seems to be a bit of an outlier. It's actually somewhat troubling to me that a city can be sent into bankruptcy by the courts over a single lawsuit. Stockton and San Bernardino's problems were arguably brought about by a series of bad decisions while Mammoth Lakes was just a single one. It seems kind of messed up that a whole city's population can be screwed over just like that.

    California has so many problems now that I'm not even sure how they can go about fixing them without rewriting the entire state constitution. The referendum system in particular needs to be changed. So many bad laws get passed thanks to the low threshold it takes to put something on the ballot.
    Stockton's problems was a series of bad decisions, not the least of which was bending to the police union and allowing police to retire with nearly full pay and bennies at age 50. As I understand it both mammoth lakes and San Bernardino's problems were due primarily to lawsuits from developers.
    Children in the back seat can cause accidents - and vice versa.

  7. #7
    While very unfortunate, I can't help but think that this is what you get when you manage your city like a business. The services and securities that cities traditionally provide for residents, to me, are not very well aligned with business interests. But, as always, and like hundreds of planning ills that plague municipalities all over California, it can all be tied back to Prop 13: greater reliance on sales tax and continued expansion, and the castration of property tax. The CA voters did this to themselves many years ago, and we'd be seeing this same thing even if it wasn't for the downfall of mortgage-backed securities, because growth is finite.

  8. #8
    Cyburbian michaelskis's avatar
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    Quote Originally posted by chocolatechip View post
    While very unfortunate, I can't help but think that this is what you get when you manage your city like a business. The services and securities that cities traditionally provide for residents, to me, are not very well aligned with business interests. But, as always, and like hundreds of planning ills that plague municipalities all over California, it can all be tied back to Prop 13: greater reliance on sales tax and continued expansion, and the castration of property tax. The CA voters did this to themselves many years ago, and we'd be seeing this same thing even if it wasn't for the downfall of mortgage-backed securities, because growth is finite.
    Michigan did something similar with proposition "A" several years ago. It put a cap on property taxes regardless of how much the actual value of the home changes.

    For me, I wonder if the problems are a combination of cities run like businesses and municipalities offering services when times were good, and not cutting back on them when things got bad. There is no easy answer, but I worry that people become too expectant on services that the government just can't afford.
    There is no such thing as failure, only learning experiences. However, it is our choice to learn the lesson and change or not.

  9. #9
    Cyburbian
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    I don't think it was services per se that caused the problem. It was overly generous pensions based on unrealistic growth projections. So even if the city cut back, it did little to help the situation due to their enormous pension obligations. Some of the pensions out there are completely ridiculous, so it's little wonder why some cities are hurting. I mean how is something like full pay plus a 7% annual increase sustainable for someone who retired at 50?

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    Super Moderator kjel's avatar
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    Quote Originally posted by Blide View post
    I don't think it was services per se that caused the problem. It was overly generous pensions based on unrealistic growth projections. So even if the city cut back, it did little to help the situation due to their enormous pension obligations. Some of the pensions out there are completely ridiculous, so it's little wonder why some cities are hurting. I mean how is something like full pay plus a 7% annual increase sustainable for someone who retired at 50?
    It's the best Ponzi scheme out there. NJ is in the same boat.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

  11. #11
    Cyburbian Raf's avatar
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    Before everybody runs off the cliff thinking California is running of the cliff (and it is..hehe), bankruptcies are not a panacea for many cities here in the state. Each of these bankruptcies have some sort of outlier. Now i am not saying that all things are running healthy everywhere else, but it just seems each city that has declared really just put themselves into a hole, and it just so happens that they also were the beneficiaries of boom, and now are busting.

    Stockton:
    It's sad because my planner heart says I had a helping hand in creating the glut of houses in this City getting into this mess. Basically the City with additional rooftops "oversold" on transforming itself from some podunk ag town to a refuge for Bay Area commuters looking for cheap homes (a 2 hr plus commute). The City's Redevelopment Agency went big and constructed basically a new downtown that features when really nice waterfront park, a new Arena, and purchased buildings for redevelopment. The Arena never attracted enough events, the buildings were redeveloped but could not find tenants as they were done at the peak and bond payments ate up Stockton. Skinking real estate values didn't help as with prop 13, the City/County must asses a lower property value if it drops. In addition, they gave generous payment to CalPERS (state retirement system) for their employees through a bond sale. Even cut backs couldn't save them because they did not save enough during the boom and rolled the dice to re-tool the City's image.

    San Bernadino:
    While i don't know much about the town itself, but again, sinking real estate, the use of RDA funds for items typically covered by the General Fund (whether this is legal or not is being investigated) and supposidly an investigation is underway on how much the books were cooked.

    Mammoth Lakes:
    Lawsuit killed the town.

    Without the ability to raise taxes such as property taxes thanks to prop 13, the reality is every city and county must rely on sales tax to fund operations. With redevelopment gone, Cities don't have much to fall back on anymore unless you are big time retail hub or TOT taxes. The changes to help california cities need to come from a new state constitution and dumping prop 13 with a modification to the true intent, keep grandma in her home.
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  12. #12
    Super Moderator kjel's avatar
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    Quote Originally posted by CPSURaf View post
    Before everybody runs off the cliff thinking California is running of the cliff (and it is..hehe), bankruptcies are not a panacea for many cities here in the state. Each of these bankruptcies have some sort of outlier. Now i am not saying that all things are running healthy everywhere else, but it just seems each city that has declared really just put themselves into a hole, and it just so happens that they also were the beneficiaries of boom, and now are busting.

    Stockton:
    It's sad because my planner heart says I had a helping hand in creating the glut of houses in this City getting into this mess. Basically the City with additional rooftops "oversold" on transforming itself from some podunk ag town to a refuge for Bay Area commuters looking for cheap homes (a 2 hr plus commute). The City's Redevelopment Agency went big and constructed basically a new downtown that features when really nice waterfront park, a new Arena, and purchased buildings for redevelopment. The Arena never attracted enough events, the buildings were redeveloped but could not find tenants as they were done at the peak and bond payments ate up Stockton. Skinking real estate values didn't help as with prop 13, the City/County must asses a lower property value if it drops. In addition, they gave generous payment to CalPERS (state retirement system) for their employees through a bond sale. Even cut backs couldn't save them because they did not save enough during the boom and rolled the dice to re-tool the City's image.

    San Bernadino:
    While i don't know much about the town itself, but again, sinking real estate, the use of RDA funds for items typically covered by the General Fund (whether this is legal or not is being investigated) and supposidly an investigation is underway on how much the books were cooked.

    Mammoth Lakes:
    Lawsuit killed the town.

    Without the ability to raise taxes such as property taxes thanks to prop 13, the reality is every city and county must rely on sales tax to fund operations. With redevelopment gone, Cities don't have much to fall back on anymore unless you are big time retail hub or TOT taxes. The changes to help california cities need to come from a new state constitution and dumping prop 13 with a modification to the true intent, keep grandma in her home.
    I'd say that this is by no means limited to California and we could find towns in many states in the same situation. NJ passed a 2% cap on property tax increases and anything over that has to go to for a vote. Munis got creative with fees that fall outside of the cap and now the legislature is looking to close the loopholes and exemptions to the cap. Really what's killing NJ munis is that there are so many of them, few share services, nearly all have their own school district, police force, fire dept, city hall, and all that goes with it.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

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