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Archive for the ‘Bankruptcy’ Category


Posted by Tim Bryce on October 9, 2013


– Other municipalities? States? The Nation? All of the above?

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As most of us are aware, the City of Detroit declared bankruptcy in July, the largest municipality to do so thus far. This sent tremors through many state governments, particularly Michigan, who are wary of fragile government economies. The American public though doesn’t seem to realize the magnitude of the problem yet, or perhaps they choose to simply ignore it (I suspect the latter). Nonetheless, according to “Governing” Magazine there is already 37 municipal bankruptcies in progress. The cause is rather simple, they have made some bad decisions along the way which has crippled their economies, for example:

* STOCKTON, CALIFORNIA filed for Chapter 9 bankruptcy protection last summer (2012). Reported reasons include unmanageable salary obligations and public employee debt. Such benefits are said to account for $800 million alone. With a population of just under 300,000, that represents $2,666 per citizen. Stockton joins San Bernardino and Mammoth Lakes in seeking bankruptcy protection in California.

* SCRANTON, PENNSYLVANIA is facing a $21 million budget gap. Last year (2012), the city was literally running out of money, causing the mayor to cut government salaries to minimum wage and sell off assets. This was not enough and last year the mayor urged a 78% tax increase, which was vetoed by the town council. Even if the tax increase was supported, it wouldn’t have been enough to solve the city’s finances.

* CAMDEN, NEW JERSEY – Once known as a major manufacturing and shipbuilding area, Camden is facing urban decay. The city is located on the Delaware River across from Philadelphia. As corporations slowly closed their doors and moved away, they put a sizable dent in the city’s tax base. State subsidies were used to prop up the government, which actually grew while manufacturing declined. The city’s budget is currently at $150 million, but tax revenue is less than $25 million. This has caused massive cuts in government service, including the entire police department. The streets are now patrolled by Camden County.

* DETROIT, MICHIGAN – As mentioned, Detroit filed the largest U.S. municipal bankruptcy in July. Over the last 50 years the city lost half of its population and now is at approximately 700,000. Detroit is now saddled with a whopping $18 billion in long-term debt and an operating deficit close to $400 million. One-third of the city’s budget is going toward public employee retirement benefits.

Following Detroit’s announcement, other major cities started to report they are also beginning to feel the squeeze. For example, CHICAGO owes the state of Illinois $30 million in back taxes. Their current budget deficit is expected to grow to $1.6 billion by 2016, thanks in large part to growing public employee pensions.

NEW YORK CITY’s Mayor Michael Bloomberg has already begun to warn New Yorkers tough financial times are just around the corner and will have to be addressed by the next mayor (as he exits stage right). Raising taxes will be highly unpopular in a town with some of the highest taxes in the country already.

Beyond the cities, states are also standing under the Sword of Damocles. CALIFORNIA is well remembered for providing creditors with I-O-U slips as opposed to cash. The state’s financial problems are still very much real, even though Governor Jerry Brown signed a $92 billion budget that appears balanced, assuming voters pass an $8.5 billion tax increase next month. At the heart of the problem is the state’s various retirement programs representing $500 billion in unfunded liabilities. In addition to California, Illinois, New York and New Jersey are not far behind with similar problems.

All of this means our various government bodies can no longer afford to conduct business as usual. Increasing taxes is placing a hardship on taxpayers and forcing companies to move their operations to more tax friendly locations, such as the South. Cuts in spending are inevitable as it is becoming clear we can no longer afford expanding government bureaucracies. Public employee retirements will have to be reviewed and likely modified, at least the rules for participation. Unions will also come under the microscope as companies find “right-to-work” states more attractive. In its annual Labor Day report, Gallup found fewer Americans approve of labor unions today (54%) than they did when the survey began in 1936 (72%) during the height of the Great Depression.

And then we have the federal government which is saddled with a massive $16.9 trillion debt. The amount is so large, the average taxpayer cannot comprehend it. Now, in October, lawmakers must decide whether to raise the debt ceiling again or assume their fiduciary responsibilities and finally do something about it. Because of the divisiveness in our capitol, I’m betting nothing of substance will be done, just more “Rearranging the deck chairs on the Titanic.”

Over time, something will become apparent to American taxpayers, filing for bankruptcy protection is one thing, fixing the system of tax-and-spend is quite another. Bankruptcy only represents a temporary reprieve from your creditors. Unless you make significant changes in your attitude and operations, you will likely repeat your mistakes again and again. Like it or not, correcting government bankruptcies means the taxpayers are going to have to settle for less public service. Obviously this will be unpopular as it will affect our standard of living. If governments are to survive it will be necessary to reduce costs, streamline services, flatten the bureaucracy, and save money, not simply tax-and-spend. Then again, politicians are rarely elected for promising less.

Keep the Faith!

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Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at

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Copyright © 2013 by Tim Bryce. All rights reserved.

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Posted by Tim Bryce on October 30, 2009

I recently saw a local merchant close his doors after only one year of operation. I don’t want to get into the type of business he was in, but suffice it to say it could have been successful had the proprietor tried a little harder than he did. Instead, he chalked the defeat up to the recession and simply walked away from the business without clearing out his shelves and equipment, or paying his bills. In fact, his mail piled up at the door unopened, and creditors hounded the landlord to let them in the building to retrieve their unpaid equipment. What I found most interesting from this experience though, was the proprietor’s attitude who couldn’t have cared less. He wasn’t the slightest bit embarrassed, apologetic or ashamed of himself. In fact, if you talked to him, you would get the impression that everything was great and he had no problems. He literally just walked away from the company leaving behind a pile of bills and stiffing his creditors.

As a Floridian, this attitude is not exactly uncommon and we have seen many people happily declare bankruptcy at the expense of others. We have some of the most liberal bankruptcy laws in the country. One moment a guy is declaring bankruptcy and leaving his creditors in the lurch for considerable sums of money, and the next moment he wants to be their best friend in a new venture. There is no guilt, no shame, no embarrassment. And I guess I really don’t understand this attitude. I don’t care if he has a tune on his lips or a song in his heart, a deadbeat is a deadbeat.

I don’t consider someone a deadbeat if they have failed in business, yet want to genuinely make amends for their actions. A deadbeat is someone who feels no guilt in abusing the system to his advantage. Even a beggar has honor if he acknowledges his own deficiencies. In contrast, a deadbeat is only interested in one thing, himself. He has no concern for his employees, his vendors, or his customers. He just moves along to his next scam.

I don’t know where this mindset originated from. Years ago, declaring bankruptcy would be considered a scarlet letter in society, but it’s not like that anymore. Now, people are congratulated for outfoxing the system and leaving a trail of debt in their wake, regardless of the people hurt along the way. Is our society so perverted that we applaud bankruptcy as opposed to success? I’m sorry, I just don’t get it, and most likely never will.

Such is my Pet Peeve of the Week.

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is the Managing Director of M. Bryce & Associates (MBA) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at

For Tim’s columns, see:

Tune into Tim’s new podcast, “The Voice of Palm Harbor,” at:

Copyright © 2009 by Tim Bryce. All rights reserved.

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