Atwater Cuts in Effort to Dodge Ch. 9

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SAN FRANCISCO – The struggling city of Atwater, Calif. continued working to avoid bankruptcy this week when its city council unanimously adopted a financial plan that would add nearly $3 million towards its general fund and help close an estimated $3.3 million deficit for the current fiscal year that ends July 1.

Atwater Mayor Joan Faul said during a phone interview that city leaders and employees are “working hard” to avoid bankruptcy.

Atwater staff has said the city’s general fund is facing a combined $3.3 million deficit for fiscal 2013, including a $2.3 million gap carried over from the previous year, on projected spending of $11.4 million.

According to the fiscal 2011 audited financial report of the city of 28,000 in the Central Valley, it has $94 million of outstanding debt that includes mostly tax allocation bonds and wastewater revenue bonds.

The majority of the savings in the plan council approved Monday will come from employee layoffs, retirements and salary reductions agreed to by its unions. It also voted to move ahead with a spring election for a half-cent sales tax increase for seven years that would be expected to raise $1 million.

Since 2008, the city has cut staff by nearly 30%.

“I feel hopeful,” said Nancy Vinson, business agent for the American Federation of Federation of State, County and Municipal Employees, which represents Atwater’s miscellaneous and clerical staff. “They are going to keep hacking away at this to see if they can keep out of bankruptcy.”

Vinson said she has confidence in the interim city manager Frank Pietro, also Atwater’s long-time police chief.

Last month, Pietro told council in a staff report recommending a fiscal emergency, which allows it to seek concessions from labor groups, that unless the city achieved the needed savings it may need to file for bankruptcy in the next three months.

The city council is still scheduled to discuss its bankruptcy options on Nov. 13.

Atwater’s cash flow is a major concern. The city’s cash balance has dropped from around $18 million in fiscal 2011 to an estimated $6.3 million for fiscal 2013.

The city also has problems in its other funds, including deficits in its sanitation and water funds, where it has lagged in raising rates.

In an earlier staff report, Pietro blamed the city’s financial problems on the dramatic impact of the recession on the Central Valley and the lagging economic recovery in the region.

Last month, Standard & Poor’s downgraded its underlying rating on Atwater Public Financing Authority wastewater revenue bonds to BBB-minus from A, and placed the rating on CreditWatch with negative implications.

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