If the Federal government were a public company, it would be delisted by now!

Where do the Federal government and municipalities find the people who come up with ideas and programs? Was it not obvious that, given the opportunity, owners of American cars would trade them in for those manufactured in foreign countries?

Back to the Cambridge “story,” although it has the same theme of incompetence. After the now famous “Gates” incident, the Cambridge City Manager decided to appoint a commission to study how better police officers can interface with the public. Of course, this necessitated the hiring of a $130,000 a year consultant who has bounced around from one political appointment to another. The City Manager decided, I suppose, that the establishment of this committee was such an emergency that he ignored the City’s guidelines for posting a job and looking for qualified candidates: thus we now have Ms. Flagg. Well, Ms Flagg is certainly climbing the ladder pretty quickly. Last year, she was appointed to a $115,000 a year job and “Robert F. Cullinane, secretary and treasurer for Teamsters Local 127 in Quincy, which represents toll collectors at the authority, said Flagg’s hiring sounds like political favoritism.”

It turns out that the great Commonwealth of Massachusetts has no enforcement policy when it comes to hiring insiders, quickly, for big paying jobs! What a city, eh?

By the way, the Cambridge City Manager does alright for himself. He now earns more than $300,000 in addition to an extremely comfortable benefits package.

It’s Official!

Today, August 25, 2009, the Administration announced that the Federal deficit has been raised from $7.1 trillion to $9 trillion, but there is still no mention of the estimated $1.5 trillion in Other Post Employment Benefits (OPEB)  that municipalities have either not funded or to which they have made minimal contributions. How long will it take until the municipalities look to the states for a “bail out,” and how long will it take for the states to look to the Federal government for a “bail out.”

Welcome to Citynomics

Citynomics will report on the growing and alarming financial instability of most municipalities in America. There are many elements creating such instability, perhaps most devastating among them:  unfunded Other Post Employment Benefits (OPEB) liabilities in municipalities across the country that have been estimated to total more than $1.5 trillion. This will also be a blog where you can post comments about the incompetence of your municipality’s financial management. It should be clear to all of us that this is no time to have incompetents making decisions that will effect our pocketbooks for at least the next few decades.

My city, Cambridge, MA, has a current $602 million OPEB liability. It also has additional liabilities – considerable ones – as you will read below. I encourage those in other municipalities to seek information, through FOI requests, on their city’s OPEB, regular pension, and bond liabilities. When you have information to share, please post it in a comment.

Yesterday, AP reported that the Federal deficit has grown by $2 trillion, now standing at $9 trillion.  Most States face growing deficits and municipalities surely can’t depend on their States to “bail” them out. Will this $1.5 trillion liability now be added to the Federal deficit – bringing it to $10.5 trillion?

Take a look at the serious financial trouble that Cambridge, MA taxpayers are facing:

$602 million    Other Post Employment Benefits (“OPEB”) for current employees and current retired employees

$67 Million      currently unfunded in regular pension

$220 million    lost (28.6%) in pension fund 2008

$300 million    minimum owed from bond liability

$1.189 billion           Total

How, you might ask, did Cambridge, MA get into such financial trouble? To begin with, Moody’s, Fitch, and S&P have awarded Cambridge with their Triple A bond ratings, so the City just keeps borrowing money. Imagine, a city with nearly $1.2 billion in financial liabilities has a Triple A bond rating from the three major ratings agencies! Further, Cambridge has one employee for every 22 permanent residents (the City population is published as 101,000, but 25,000 of this number are students)! The salaries paid to City workers are staggering and each employee will be supported for the rest of his or her life. With only 22,000 taxable parcels in the City, a lot more wealthy people, who love paying very high taxes, will have to move to Cambridge – and that is unlikely to happen.

While Cambridge, MA, has a world-wide reputation as a center of intellectualism (we are home to both Harvard and MIT) and liberalism, you will learn from future posts that the City Charter is most peculiar – at least for a city in America! For instance, did you know that if a Cambridge City Councilor interferes with the Cambridge City Manager (who is hired by the City Council), he or she is subject to a fine and/or imprisionment? Link to Plan E, Section 107 to read the amazing paragraph for yourself.