Another blow to El Monte:
El Monte considers bankruptcy
By Rebecca Kimitch, Staff Writer
Posted: 06/29/2009 01:28:02 AM PDT
EL MONTE – The city council will consider Tuesday whether to initiate Chapter 9 bankruptcy proceedings for El Monte, according to the council’s agenda.
The council will consider a resolution that would authorize city staff “to commence all necessary preparations for the initiation of Chapter 9 Municipal Reorganization proceedings under 11 U.S.C. Section 901 et seq.”
The steps are necessary “to regain sustainable fiscal solvency” and “gain economic breathing space and to avoid magnifying additional legal liabilities,” according to the resolution.
El Monte has faced serious financial troubles since last year, when plunging sales tax revenues and rising employee benefit and retirement costs caused a budget deficit that hasn’t gone away since, despite layoffs and cutbacks.
Most recently, it faced a $12 million deficit for the fiscal year that starts Wednesday. To cut $10 million, the city manager laid off 100 employees and recommended other cutbacks, including the closure of one of the city’s four fire stations.
The council is expected to approve this staff-recommended budget Tuesday as well.
Despite these cutbacks, the city still faces a $2 million deficit. And a state takeaway of property tax and gas tax revenues – proposed by Governor Arnold Schwarzenegger to address the state’s own budget crisis – would bump the deficit to $4 million, according to the resolution.
The resolution authorizes staff to prepare a “pendency plan” for Chapter 9 proceedings and retain special Chapter 9 legal counsel. It requires staff to report back to the city council with a plan of action within a week