US Housing defaults rise again, City budgets hit , and bankruptcy looms as reduced Property tax incomes cut State employee retirement benefits
Realty Trac report today that default notices, auction sale notices and bank repossessions — were reported on 243,353 properties in the US which shows nationwide ;
1. A 4 % increase from the previous month
2. A 65 % increase from April 2007.
3. This represents about 2% of the total number of households in the US.
Nevada, California, Arizona continue to see the highest rates of foreclosure, with Nevada still highest, leaving one in every 146 Nevada households in April having a foreclosure filing, nearly 4 times the national average nearly and double the rate in April 2007.
California with 64,683 reorted filings came second , slightly down in numbers from March but 112 % up from April 2007.
6 California cities feature in the Nations Top 10. Merced took the top spot, followed by Stockton at No. 2, Modesto (3rd) Riverside-San Bernardino (4th) ,Vallejo-Fairfield (6th) Bakersfield (8th) - site of the ill fated Lehman / Sun Cal backed McAllister Ranch debacle. see Wednesday, June 11, 2008 Lehman Brothers investments exposed as losses pile up..Alpha female CFO Ms Erin Callan NYPD cop's daughter's is on the case (leaving Florida cities Cape Coral-Fort Myers (5th), Port Lucie-Fort Pierce (9th) Fort Lauderdale at No. 10.
Arizona showed accelerating foreclosure activity with a monthly increas in April of 26% a total increase of 181 % from April 2007,
Not only do foreclosures slow sales and depress prices it can affect Property Tax incomes , putting municipal budgets in peril. For example, the city council in Vallejo, California - with the nation's 6th highest foreclosure rate in April , and facing a projected US$16 million deficit in the fiscal year 2008-09 (commences July 1st) voted unanimously on May 7th to have the city file for bankruptcy. Which they did, on May 27th (City Press release)
Chapter 9 bankruptcy allows the city to gain temporary protection from creditors whilst allowing the city to continue to offer citizens necessary services.
The bankruptcy process will however $750,000 to $2 million in legal fees alone, city officials said.
More California cities may file for bankruptcy because they face the same toxic mix of falling tax revenue, rising payroll expenses and a slumping housing market . "I don't think Vallejo is unique," said Mark Levinson, a bankruptcy attorney hired by Vallejo. "Vallejo is not the only city in California or the U.S. that is saddled with employee contracts that are burdensome."
Vallejo promised its employees salaries, benefits and retirement packages that it simply cannot pay, signing generous labour contracts during economically flush times, claims Marcia Fritz, vice president of the California Foundation for Fiscal Responsibility
Governor Arnold Schwarzenegger asked Gerald Parsky ( he served as the California campaign chairman for President George W. Bush in 2000 and 2004.) of Los Angeles, former chairman of the UC Board of Regents to head a bi-partisan gubernatorial commission - Public Employee Post-Employment Benefits Commission - that studied California's public pension and healthcare liabilities. Parsky's firm, Aurora Capital Partners, also happens to invest $150 million for CalPERS, which just happens to be one of the world's largest pensions.
After 12 months looking at the California's liabilities they reported in January that their unfunded obligations were a jaw dropping US$118 billion for retiree healthcare -- the state of California was on the hook for US$48 billion -- plus US$63.5 billion for pensions.(Full report pdf) pensions were funded up to 89% , they were 119% funded in 2000.
Last month Schwarzenegger ordered his finance director, Mike Genest, to find a way to pay down the state's $48-billion unfunded healthcare obligation over a 30-year period without "raising taxes or dipping into the state's general fund." Genest estimates it will cost the state an extra $1.1 billion annually to fully fund retiree healthcare. It's already kicking in $1.6 billion, plus $4 billion for pensions.
As a small aside the Parsky report recommendation 28 has widespread utility worldwide...Which means, don't trust the actuaries, investment analysts, brokers, and check every assumption and calculation they make to arrive at their conclusions. Many (if not all) listed UK companies underfunded pensions to boost profits, share prices and Director's share option and bonuses.
At Appendix 3 Page 231 they even provide a through 16 page handy guide, "How to read an Actuarial Valuation" ...which is recommended reading to anyone with a Pension of any sort.
...and Lord Patel wished he had been able to read a copy about 15 years ago.