Bloomberg News

Fresno Mayor Orders Worker Cuts to Fend Off Insolvency

February 13, 2013

The mayor of Fresno, California, ordered more city workers fired to cut payroll costs after municipal unions gathered enough signatures to block part of her plan to keep the city out of bankruptcy.

Mayor Ashley Swearengin said she ordered the city manager to draw up layoff plans after a union-led petition drive forced the City Council to consider a ballot measure on her plan to privatize residential trash services, according to a statement. The plan, approved by the council in December, was projected to raise $200,000 a month beginning in March.

Fresno, California’s fifth-largest city at about 510,000, has seen labor costs rise after tax revenue fell in the longest recession since the 1930s. Moody’s Investors Service lowered the city’s issuer debt rating in July to A3, the fourth-lowest investment grade, from A2, and cut its lease-supported obligations last month to Ba1, a non-investment grade, from Baa2.

“There are two actions that we must take to protect our city from complete decimation of public safety and, potentially, insolvency -- privatizing our solid waste services and relatively modest concessions from our bargaining groups,” Swearengin said.

Stockton (3654MF:US), with 292,000 people about 80 miles east of San Francisco, became the biggest U.S. city by population to go bankrupt with a filing in June amid rising labor, pension and retiree health costs. San Bernardino (13545MF:US), a city of about 213,000 people 60 miles east of Los Angeles, sought court protection Aug. 1.

Fresno officials have repeatedly said they don’t intend to follow the path taken by those cities.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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