California city lay's off city employees, readies for bankruptcy

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http://www.reuters.com/article/2012/10/02/atwater-bankruptcy-layoffs-idUSL1E8L2LCU20121002?type=marketsNews

SAN FRANCISCO | Tue Oct 2, 2012 7:59pm EDT

Oct 2 (Reuters) - At least 21 of Atwater, California's roughly 80 employees will receive layoff notices, a representative for one of its labor unions said on Tuesday, as city officials try to balance the books and avoid taking a step toward a bankruptcy filing for their city.

The city of about 28,000 residents in California's Central Valley faces a budget gap of more than $3 million, which has prompted officials to say they would consider declaring a fiscal emergency, a move that could open the door to a bankruptcy filing.

If Atwater seeks Chapter 9 bankruptcy protection from its creditors, it would be the fourth city in the most populous U.S. state to do so this year.

Like other cities in inland parts of California, Atwater has fallen on hard times due to a plunge in property tax revenue.

To help plug Atwater's budget gap, city officials plan to fire six police officers, three managers and 12 non-safety employees represented by the American Federation of State, County and Municipal Employees (AFSCME), said Nancy Vinson, a business agent for the union.

Vinson also said remaining employees represented by AFSCME will be asked for a 15 percent pay cut on top of the 10 percent cut they previously accepted through furloughs.

In addition to cutting Atwater's payroll expenses and its work force, city officials plan to raise water rates to increase revenue, Vinson added. Atwater officials could not be reached for comment on Tuesday.

City officials are scheduled to meet on Oct. 3 to review fiscal measures and to discuss a fiscal emergency declaration.

Atwater is located about 62 miles (100 km) southeast of Stockton, the first city in California to file for bankruptcy this year.

Stockton, a city of 300,000 residents, sought Chapter 9 protection after 90 days of inconclusive mediation with its creditors.

By contrast, the city council of San Bernardino in July authorized a bankruptcy filing after declaring a fiscal emergency. A city of 210,000 residents 65 miles (104 km) east of Los Angeles, San Bernardino filed for bankruptcy on Aug. 1.

Mammoth Lakes, a resort town of about 8,000 residents in California's Sierra Nevada Mountains, filed for Chapter 9 protection on the heels of Stockton's filing.

Mammoth Lakes sought bankruptcy protection because it could not afford to pay a $43 million legal judgment against it. That dispute has since been settled and Mammoth Lakes later this month will ask the judge hearing its bankruptcy case to dismiss it, Assistant Town Manager Marianna Marysheva-Martinez said on Tuesday.

Edited October 4, 2012 by Bad_Daddy