Prichard, Alabama fails to pay retirees


The check is not in the mail.  Prichard, Alabama, came out of Chapter 9 bankruptcy in 2002 and promised to make deposits into its public pension fund.  They didn’t and now they are simply out of money.  Retirees did not get their October 1 payment.    What’s next?  The retirees are suing.  The city is looking for investors in a bingo operation as a last ditch effort to raise cash.  The bankruptcy word is being raised again.  (see our post from June 20)

The city does not have general obligation bonds outstanding at this time but some are eyeing the cash in the water and sewer system. That system, which refinanced its bonds in May (insured by AGO) has had its disputes as well.  They were under a consent decree to clean up their system.  The Mobile Area Water and Sewer System (MAWSS) was willing to take them over, but the city refused.  The city purchases water from MAWSS and handles its own treatment, distribution, billing and collection services.  Standard and Poor’s rated the system BBB- in 2005 but rates the 2009 bonds A-.  Coverage has improved, disclosure of the multiple lawsuits that were in the 2005 official statement have been dropped from the current disclosure and the refunding will save the water and sewer Board a significant amount of money.    After the May 2009 issue, the Board signed a 10 year public-private-partnership contract for $78 million with Severn Trent to operate the system (the amount is according to WKRG).  The amount seems high for a 2008 budget of about $7.4 million (excluding depreciation and amortization) that also includes about $1.0 million fixed cost for water purchase from MAWSS. 

Is the city’s dilemma symbolic of a pattern across the U.S.?  We think so.  Small municipalities that manage their own pension and retiree benefit programs, poor fiscal management and maybe an external shock such as loss of a major employer or reduced tax revenues are symptoms of trouble.  Vallejo, California fits this pattern as does the Sierra Kings Health Care District, California that just filed Chapter 9 last week.  While the common belief in the market is that municipalities don’t default, we see trouble among these smaller, vulnerable communities.  Watch the balance sheet for these factors before you pass “go”.

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2 comments on “Prichard, Alabama fails to pay retirees

George

For gosh sakes when are these stupid politician going to learn, we need to get rid of all pensions for gov employees all over the country or go broke.

The tax payer can no longer afford to pay cops,firemen, teachers and other gov employees to retire at 50 with great pensions and health care. It’s nothing but welfare, time to shut the faucet off now. If they don’t like it, then find another job, someone will step right up and take their place. Everyone should get SS, and save for their own retirements with a 401k, time to stop stealing from your own children.

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tall trees club

The public pension systems or California, Arizona, Illinois, New Jersey, Florida, Colorado and New York are little more than ponzi schemes.

Why should a Vallejo Firefighter retire at 49 years old with $260,000 in pension and healthcare for life for himself and entire family ? This is the norm now that we have collective bargaining unions.

These public sector fatcats enjoy far greater wages and retirements than the private sector.

The greedy people should be ashamed of themselves, steeling from the younger generations.

Shame on you !

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