In this field the Mayor is clearly liable

Since July 1, the small town of Maywood (less), all close to the historic center of Los Angeles, began to dismiss all municipal employees. This is what are resolved local councillors, who will now replace police, employees of the financial, administrative and municipal museum guards by employees of private firms. The municipal Council, which ensures that the city is bankrupt, hopes to save three quarters of its salary costs...

The skid of the finances of this small district of Los Angeles is not an isolated case. On the contrary, it is California megalopolis, the second city of the United States by the number of its inhabitants, located in an almost as desperate financial situation. And the worst is perhaps to come, foreshadowing painful decisions. A declaration of bankruptcy of the city as part of options...

1,000 more redundancies

In fact, the situation is already very serious. In early June, Antonio Villaraigosa, Mayor of the town, of Mexican origin, did adopt a budget of 6.7 billion in deficit of 10 approximately. After a first term of four years instead succeeded, he was comfortably re-elected year last with more than 55 of the vote. A popularity that he owed in part to its political support to Washington - he was member of the economic transition Committee set up by Barack Obama after his election. But his past of trade unionist, who long assured him some kind of social peace. The time seems to well over. The budget passed last month provides as well as in addition to 760 employees that it had decided to dismiss to alleviate the finances of the city, one thousand others could be failure of the negotiations planned this summer, to review wages to decline.

How has it happened As the rest of the United States, Los Angeles obviously suffers the effects of the economic crisis. The unemployment rate has doubled since 2008, reaching almost 12 of the workforce (much more in certain areas), not to mention all those that are not listed, because they are entitled to compensation. In total, estimated that most of half a million jobs have been lost because of the crisis. The slowdown in economic activity has also greatly reduced local taxes that pay companies to the city, and forecasts are no better for tomorrow: they should still fall 20 in the next two years.

But Los Angeles also pays the price of a generous policy for public employment, which today turns against it. In this field, the Mayor is clearly liable. He, the former head of the Union of municipal employees, will have indeed contributed to between 3,000 and 5,000 public jobs since 2005. Creations of posts accompanied in some cases of significant increases of wages, and heavy financial commitments - such as the development of a whole neighbourhood intended to allow companies specialized in green technologies ("clean tech"). Now, the burden of public wages and pensions would represent 80 of the budget of the city.

Consequence of this expensive policy, the city of angels must now support a debt of $ 2.3 billion, which could double in five years. For several reasons. In addition to the growing weight of salaries and pensions, the city has seen to increase the rate at which it borrows, as a result of the degradation of its rating. The stock market crisis has also weighed in the balance: most public pension programs are financed by funds in shares, including cost-effectiveness, in recent years, has been closer to 3 and 8 promised in the 2000s.

Dispose of in the heat

Therefore, the more extreme decisions are considered. Former Mayor of the city from 1993 to 2001, Richard Riordan did not hesitate to dramatize. He notably accuses his successor to have tried to hide the exact situation of municipal finance, renegotiating discreetly many commitments. A process that would enable it to reduce the obligations of the most urgent payments, at the price of exorbitant financial interests, which will be payable in the years to come.

"The Mayor control over the economy of the city," protested his predecessor. And he drew as a finding that Los Angeles would soon declare bankruptcy...

According to him, the city should legally be placed under the protection of a judge who would administer its finances (the equivalent of the business, the famous chapter 11 bankruptcies Act). Main advantage of the measure, the judicial relief would decide in the bright by reforming the social plans of municipal employees, the cost is expected to soon exceed the $ 1 billion a year. A sum that the town no longer has the means to fund. "Even if it not do so this year, need to resolve it later", said Richard Riordan, who recognizes that, politically, no team cannot take radical measures it calls its wishes.

Everyone does not agree, of course. Let's start with the Mayor himself and his team. "A declaration of bankruptcy would be catastrophic for the city in terms of image", said Jack Kyser, Chief Economist with the Los Angeles County Economic Development.

Privatize municipal jobs

Others have a less clear-cut view on the issue, considering that even if the image of the city in was severely bruised, the measure could have its interest. "A bankruptcy could be an opportunity to completely redefine the missions and responsibilities of the city, what many see as a necessity," said Stuart Waldman, President of the Valley Industry and Commerce Association. An association ensuring the economic development of the San Ferdino Valley, a part of the city of Los Angeles where reside many economic interests.

A declaration of bankruptcy is perhaps not the only way to achieve this radical challenge. The municipal team is already assessing the possibility of transfer to the private sector responsibility for some of its non-essential services, such as the management of public car parks or the Zoo...

In any event, the financial future of Los Angeles is just it. The State of California also her worst difficulties in completing a budget anyway, which will be largely loss-making. If the Governor Schwarzenegger, at the end of mandate, continues to delete public jobs (schools, police, etc.), the cities of Golden State shall, at least in part, substitute for him to ensure the continuity of public service. At their expense. Los Angeles has more ways.

Moreover, observers noted that privatize municipal activities, at the present time, won't be easy because the private companies, themselves often in trouble, will be no gift. "This is not when"mode panic"that is the best armed to negotiate", noted Darry Stragow, political analyst close to the Democratic Party.

Then what to do A solution, at least, should be excluded for at the outset: that which would significantly raise taxes. Californians are still viscerally opposed to an increase in tax pressure. In any event, Governor Schwarzenegger has made vote during his tenure of the provisions seriously complicating the task of local authorities who would consider increasing their taxes...

Painful cost reductions appear therefore inevitable, if Los Angeles wants to escape to a resounding bankruptcy. But for the time being, these measures continue to face the very social fiber of the Mayor. Who knows that it cut much of its electoral base if it engaged in this way. Remains only to pray for a sudden and sustained economic growth back. A scenario in which no one believes.