The map above is for the geographically ignorant who believe that everything is booming in California and need a wake up call.
Little did I think that I would be penning a piece about the risk of Municide happening all over again, but here we are 17 years later. The United States might actually have a candidate for Chapter 9 bankruptcy as apparently former political leaders in Democratically controlled California couldn’t keep their hands of their co-workers and God knows who else.
The one thing that this town is best know for has been seen in countless TV shows and movies over the decades so perhaps this will jolt a few memories.
The headline on Sunday from the Los Angles Times said it all (sorry, subscription required to read the full story):
Santa Monica poised to declare fiscal emergency; payouts to sex abuse victims cited
However, this news story from Fox News 11 in Los Angeles does this story some real justice:
The insanity of Chapter 9 has not really been seen since the Great Financial Crisis era yet few understand why this happens. It is not just because of the lawsuit settlement that this town is in trouble and believe it or not, Santa Monica is not the only community facing this prospect.
As home values decline, taxpayers lose their jobs, and foreclosures begin to increase, the ability to collect property taxes declines for cities, towns, and counties across the United States. Another rarely discussed issue is as people take lower paying jobs, their spending habits change and instead of eating out more or making large ticket purchases, they spend the bare minimum to pay their existing bills further reducing sales tax collections and income intake for local governments.
Unfortunately, the idiocracy in Washington, DC originates from many of these municipalities that they have left debt stricken long after they boarded an aircraft for the nation’s capital. But how could this be allowed to continue?
The idealists who run these towns, much like the circus in Washington, believe that there’s no way that their state or the Federal government will ever allow a wave of municipal debt crises to arise again. Yet even in my area where I live, part of the epicenter of the 07-13 real estate crash, the bonds were at one point downgraded to below investment grade. This of course raised the cost of borrowing and naturally, politicians wanting to raise taxes on those citizens who were responsible and stayed behind paying their bills and wanting persistent cuts in government spending.
The Municide death cycle could well be revived again if and when the recessionary effects spread far and wide throughout the United States. Unlike prior times however, odds are we will see numerous municipal bond downgrades and perhaps a few defaults as a befuddled administration continues to claim that everything is awesome even as smaller towns turn into ghost towns.