Mike Shedlock

The "good news" keeps right on rolling. As such, I keep wondering which major US city will be the first to declare bankruptcy. Please consider candidate Miami.

Miami Declares Financial State of Emergency

Bloomberg reports Miami Declares ‘Financial Urgency’ as It Moves to Cut Worker Pay, Benefits

Miami, facing a $61 million fiscal 2012 deficit, declared a state of “financial urgency” for a second straight year, moving toward wage and benefit cuts.

The declaration gives unions for municipal workers two weeks to agree to contracts for the year that starts in October or be subject to actions imposed by the City Commission. Workers including police and firefighters absorbed about $80 million in reduced pay, health insurance and pensions in fiscal 2011.

“In order to balance the budget, sacrifices have to be made by everyone,” Pat Santangelo, a spokesman for Mayor Tomas Regalado, said today by telephone. The city is the state’s second-largest by population, after Jacksonville.

Miami joins at least two Florida cities that also have invoked the fiscal statute, including one that may force reductions on union workers. Hollywood, which made a declaration in May, is set to cut salaries, including for police and firefighters, as much as 12.5 percent. State law gives cities special powers when they declare financial urgency.

Standard & Poor’s cut Miami’s general-obligation bond rating two steps to BBB, the second-lowest investment grade, on June 28 and gave it a negative outlook, partly because of lawsuits from city unions stemming from cuts imposed in August 2010. The legal actions “expose the city to significant liabilities at a time when its available reserves and liquidity are low,” S&P said in a report.

 


Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.