Third California City Files for Bankruptcy

Story first reported from CNN.com

A California city filed for bankruptcy Wednesday, the third in the Golden State to do so in recent weeks, stoking experts' concerns that other cities could follow suit.

The city of San Bernardino, with more than 200,000 residents on the eastern tip of greater Los Angeles, "filed an emergency petition for Chapter 9 Bankruptcy" with a regional U.S. bankruptcy court, according to a news release from the city's interim manager.

The other two to file recently were Stockton, with around 300,000 residents, according to 2010 U.S. census data, and Mammoth Lakes, a resort town, where visitors and seasonal residents outnumber the just over 8,000 permanent inhabitants.

Many municipalities in the Golden State and around the nation are struggling to cover their costs as the economic malaise continues to hurt tax revenue streams, experts said. This will lead to more municipal bankruptcies, which have been rare until now.

"This is not the end. This is the beginning," Peter Navarro, business professor at University of California, Irvine, told CNN recently. "As cities see it can be done and is being done, it will give them the idea to do it."

Eric Hoffman, an analyst at Moody's Investor Service agreed, saying more city bankruptcies are likely in California and throughout the nation.

Cities have also struggled from budget changes made on the state level. Because of massive budget shortfalls, Gov. Jerry Brown and the state legislature made changes to vehicle tax money and redevelopment agencies that stripped locales of hundreds of millions in state funding.

San Bernardino said it will continue to provide services during the bankruptcy phase.

"There will be no immediate service reductions or changes in service to the community as a result of the filing," interim city manager Andrea Travis-Miller said Wednesday. But "reductions may occur" in the future.

In a prior statement Travis-Miller hinted the city may continue to "negotiate in good faith with its creditors."

In early July, Miller and finance director Jason Simpson issued a report stating that the city was facing insolvency and its expenditures were projected to exceed revenues by $45 million. The city's general fund reserves had been as high as $19 million in 2001 but are now depleted, the report said.
"The city has reached a breaking point," the report said.

Some $10 million to $16 million in annual revenue has evaporated in recent years as taxable sales dried up and property values plummeted in the city, the report said.

Mammoth Lakes sought protection July 2 after a property developer won a $43 million court judgment against the resort town. Experts say this filing should not be lumped in with the other two California municipal bankruptcies since it was an unusual circumstance.

Stockton, however, filed for bankruptcy in late June after three months of mediation when creditors failed to close a $26 million budget shortfall. The city had already addressed $90 million in deficits over the past three years, mainly through reducing services and employee compensation.

Both Stockton's and San Bernardino's fiscal troubles are due in large part to the massive housing downturn and recession that swept across California. Both towns were hit particularly hard by the foreclosure crisis, which left numerous abandoned homes and reduced property values in its wake. That led to lower property tax revenues, critical to supporting public services.

While some areas of the Golden State are starting to recover, the regions containing those two towns are not, said Chris McKenna, executive director of the League of California Cities.

By filing for bankruptcy, cities will be able to keep police and firefighters on the street and possibly keep some parks and libraries open while they work out their finances, he said.

For more national and worldwide Business News, visit the Peak News Room blog.

For more local and state of Michigan Business News, visit the Michigan Business News  blog.

For more Health News, visit the Healthcare and Medical News blog.

For more Electronics News, visit the Electronics America blog.

For more Real Estate News, visit the Commercial and Residential Real Estate blog.

For more Law News, visit the Nation of Law blog.

For more Advertising News, visit the Advertising, Marketing and Media blog.

For more Environmental News, visit the Environmental Responsibility News blog.

For information on website optimization or for the latest SEO News, visit the SEO Done Right blog.

Economy Driving U.S. Families Under One Roof

Reuters

The recession slowed most homebuilding in the United States to a standstill but it has fueled demand for a special kind of housing: the granny flat.

As unemployment hovers around 10 percent and healthcare costs spiral upward, homebuyers like Stephanie Charbeneau want to cut costs by sharing shelter with her extended family.

Charbeneau, a 27-year-old court recording monitor in New Haven, Connecticut, is buying a home with her husband, their two young children and her in-laws because money is tight.

"Everything is so expensive, you need your family to help you out. Thank God that they're there to help you," she said.

The Charbeneaus and Stephanie's in-laws plan to split the mortgage on a $337,000 two-family home with an apartment her brother-in-law may rent. It is a bigger and newer house than the couple could afford on their own.

They are not alone. Almost 70 percent of Coldwell Banker Real Estate agents see economic concerns compelling more families to seek housing together in 2010, according to a January poll. For more see.

At least in the short term, multi-generational housing demand is a boon for homebuilders, architects and developers mired in the deepest housing slump since the Great Depression.

The recession is accelerating a long-standing trend. U.S. multi-generational households jumped 24 percent from 2000 to 6.2 million in 2008, or 5.3 percent of all households, according to AARP, the nonprofit organization for people 50 and over. Economics and culture were the main motivators.

A prolonged push for bigger and fewer homes "would dampen housing demand going forward and further dampen a substantial recovery in the housing market," said Nicolas Retsinas, director of Harvard's joint center for housing studies.

ONE BIGGER HAPPY FAMILY

Opportunity for homebuilders and manufacturers hurts senior housing, a business aimed at about 78 million baby-boomers, as more elderly people avoid costly managed care.

"We can't afford to put grandma in a nursing home now," said Monte Anderson, a Dallas apartments developer. He plans to include 50 apartments offering separate living quarters, called "granny flats", for an older parent or adult child in a 500-unit project south of Dallas.

In Jeffersonville, Indiana, beauty salon owner Karen Carden, her husband and 19-year-old college student daughter expect to buy a larger home, hopefully with no steps, with Karen's 84-year-old father.

"Assisted living is not an option for my dad. He didn't retire with that kind of income," she said.

Senior housing occupancy rates fell to 89 percent from a peak of 93 percent at the end of 2006 and early 2007, according to data from the National Investment Center for the Seniors Housing & Care Industry. One major operator, Sunrise Senior Living Inc (SRZ.N), had to sell off assets and is in restructuring talks with lenders.

The expense of managed care is driving much of the demand for multi-generational housing, but more adult children are also bunking in with parents.

"The empty nest is a historical relic," said Stephen Reily, chief executive of VibrantNation.com, a Website aimed at women over 50 based in Louisville, Kentucky.

Two-thirds of the boomer women it polled had at least one adult child living with them, and half of those children brought their own kids along. On top of that, parents or in-laws also lived in 13 percent of these households.

COTTAGE INDUSTRY

If this trend continues, only 5.4 million new households will form over the next five years compared with the 6.9 million that more normal conditions would produce, Michael Hakim, an analyst at PPR Global, projected. That equals a loss of more than one year's average household creation, he said.

A shrinking number of households would ultimately hurt builders. But for now, the housing industry is running to meet demand for families looking to merge resources under one roof.

Homebuilders are seeing more buyers in groups that include a parent, said Toll Brothers Inc Nevada division head Gary Mayo. Interest is up in products such as KB Home's Open Series, with up to six bedrooms, and Pulte Homes Inc's "casitas" featuring an extra bedroom, full bath and closet that can serve as living quarters.

Those who cannot afford a new home are remodeling the one they have, said Bill Gati, an architect in New York City who helps clients convert part of their house to an apartment.

Manufacturers have responded by tweaking such tools as the grab bar, which enhances access to shower and toilet, to lessen their institutional look, said Melissa Birdsong of Lowe's Companies Inc.

Wide doors and entrances without steps aid accessibility for those on wheels, be they wheelchair, walker or stroller, said Trina Summins, an Atlanta-based builder working on a home that features a ground-floor suite for parents to move into.

The goal is to share responsibilities while maintaining some boundaries.

Anderson's apartments provide separation between the generations. "I can take care of you, but I don't have to live with you," he said.

Will Construction Workers Survive the Recession?

TIME / CNN

The middle and working-classes have been hammered by the Great Recession and no industry has taken it more on the chin than construction. Nationally, unemployment fell to 9.7% in January, but in construction it jumped to 24.7% from 18.7% in October. In many regions, union officials report 30% of their members are unemployed or "riding the bench." "In the previous 14 years, I had not been out of work for more than one week," says Pat O'Connor, 57, a Connecticut carpenter. With no work since July, O'Connor says, "It is a bad dream turning into a nightmare. Is construction dead? It's just horrible right now. No one expected this. It's a depression." He has a mortgage and is worried he will fall behind and lose his condo. "When I go to bed, I keep the TV on just so I have the noise. If it gets silent, I get a panic attack."

Commercial construction workers are in a bind. Before, if work dried up in Boston or Seattle, carpenters, electricians and plumbers would pack up and go to Las Vegas or Texas or Alaska. "Now there is no work anywhere," says Mark Erlich, whose New England Regional Council of Carpenters represents 22,000 union members in six states. "The largest problem is the continued lack of financing," says Jerry Rhoades, executive secretary treasurer of the Florida Carpenters Regional Council. "In the summer of 2009, there were 800 jobs on the books to build across the state. We do commercial, high-rise residential and power plants. The permits were ready, but the financing dried up. I am in my 60s and I've never experienced a downturn like this. Three years ago, three contractors would bid on a project. Now 90 contractors bid on a project. That is how desperate people are."

In the Southwest, the construction site is what the factory floor is to the MidWest — the place where blue-collar men and women earn their keep. A tour of downtown Los Angeles and the industrial warehouse area to the south finds busy jobs sites few and far between. In Vernon, Oltmans Construction Co., ranked as one of the nation's elite "Top 400 Contractors" by Engineering News Record, is completing a gleaming white 60,000 square foot warehouse and office space for CR Lawrence whose business is construction, industrial, architectural and automotive supplies. Ed Sorbel, superintendent for Carpenter's Local 630, says at the project's peak more than 70 men worked at the site. But the outlook is grim for commercial construction firms such as Oltmans and its union work force. Asked if business is picking up, Oltmans Project Manager James Wu, 37, says, "I have not seen it. It's not looking good ahead."

General Foreman Javier Gonzalez, 50, wearing a red bandana and an orange Oltmans T-shirt, says, "I was only out of work for two months in '09." Other carpenters were not so lucky. Gonzalez says his laid-off colleagues are paying their bills in a variety of ways. "One guy is doing tattoos. Some guys are bartending. And there is a group who work for realtors cleaning out foreclosed homes. They empty everything that is left in the house, resell what that can salvage and do minor repairs. It's sad. There is no work right now. Here we are in February and we've only picked up one job this year. In four weeks when this job is done, I'll be out on my ass."

Local 630, based in Long Beach, has 400 carpenters in the field with Oltmans when business is strong, says Sorbel, the union's top man on the Vernon project. "We are trying to keep our core guys, 125 to 150 men, busy. But there is no work out there." Miles Davy, a burly asphalt subcontractor, says there have been massive layoffs across all sectors of the construction trades. "I've had to let go men I have known for years. Grown men crying in my office. It's the saddest thing I've ever done."

In downtown Los Angeles, just east of Little Tokyo, one of the only active construction sites is a 53-unit apartment building at Alameda and 4th Street. Valentin Marquez, 41, father of four, does foundation and concrete work. Before this job he says he was out of work for a year. He is now struggling to keep his house. "The company I worked for for 18 years went bankrupt," he says. His colleague, Alonzo Chavez, 34, worked for the same contractor and then took a job in a burrito factory at minimum wage. Both non-union men, hands gray with concrete dust, know this job will only last another two months. "This year looks rough," says Marquez as he sits in the cab of his blue GMC pickup truck.

In the Northwest, the contraction in commercial construction came late, says Eric Franklin, spokesperson for the Pacific Northwest Regional Council of Carpenters. "We're at the bottom now." Across a membership of 26,000 in 42 locals in five states unemployment ranges from 21% to 35%. One bright spot: a few big public projects on the horizon, including a floating bridge that will connect Seattle to its suburbs. "It's a mess," says Erlich in New England. "The private sector is dead. We're at the point where we are considering investing money from our pension fund in construction projects. We either need another stimulus focused on job creation or the banks must be directed to lend."

North America's largest building-trades union, the United Brotherhood of Carpenters is a half-million members strong. For tens of thousands of its members, and the millions of Americans who depend on the construction business to make a living, it is a winter of anxiety and discontent. Tim Ahern of Carpenters Local 210 in Fairfield, Connecticut sums up the plight of the construction trades across the nation. "I only worked 20 hours the whole year in 2009."