Dan Walters: Fresno joins the ranks of troubled California cities

02/11/2013 12:00 AM

02/26/2013 8:19 PM

A couple of years ago, as many California cities were struggling with budget deficits that eventually sent several of them into bankruptcy court, Fresno appeared to be a shining exception.

The city and its mayor, Alan Autry, had kept a tight lid on spending, enjoyed a healthy surplus and had been rewarded with a sterling credit rating.

No more. Fresno, the state's fifth-largest city, is now in deep fiscal distress.

Autry's successor, Ashley Swearingen, wants to privatize the city's trash collection system and counts on an infusion of upfront cash from the private contractor, plus monthly franchise fees, to keep the city afloat.

The city manager warns that without that infusion and some service cuts, the city might not make payroll in a few weeks.

However, the city's unions are stoutly resisting the trash contract awarded to Mid Valley Disposal and have turned in ballot measure petitions to overturn it.

Moody's Investors Service, which less than two years ago gave Fresno an Aa2 credit rating and declared the city's finances to be "very strong," has since downgraded the city's bonds step by step, culminating in a recent drop to a subpar level. Moody's cited a big general fund deficit, high payrolls and other fixed costs and a struggling local economy.

Nobody's uttered the B-word – bankruptcy – yet in Fresno, but clearly if it cannot meet all of its obligations, that becomes an alternative, just as it did in Stockton and San Bernardino.

The key to Fresno's immediate future obviously is the trash collection franchise, which promises the city $1.5 million in immediate cash, plus $200,000 a month. But Fresno is also becoming ground zero for public employee union opposition to privatization of public services at any level of government.

Assuming the referendum to overturn the franchise makes the ballot, which appears likely, the local union campaign will be supplemented by cash and other resources from public employee unions elsewhere.

As a test of Swearingen's political talents, it could affect her status as one of the few Republican politicians with potential for statewide office.

Fresno thus joins distressed municipalities that range from tiny hamlets to Los Angeles. And while the circumstances differ somewhat from city to city, the high fixed costs and moribund revenue that plague Fresno are a fairly common feature.

Property and sales taxes from the housing bubble encouraged cities to loosen their purse strings, and when the housing bubble burst, those costs remained while revenue stagnated or even declined.

Even Fresno, which had boasted of its frugal ways, found itself in trouble.

And if the referendum succeeds, what then?

There's no free lunch, and other city workers may lose their jobs to protect those of trash collectors.

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