For Whom the Debt Bell Tolls

August 13, 2010

Nearly a month ago, the Los Angeles Times ran an article with an attention-grabbing headline: "Is a city manager worth $800,000?"  The story exposed how the city of Bell, in Los Angeles County, quietly paid its top two appointed managers and its police chief a collective $1.62 million annually.  Reporters have observed that Bell took advantage of a poor, Hispanic populace whose "civic engagement traditionally has been muted."  The Bell story is not just about unengaged residents, though, but about supposedly sophisticated investors whose indifference to a deeper problem -- untenable debt levels -- is even less excusable, says Nicole Gelinas, a City Journal contributing editor and the Searle Freedom Trust Fellow at the Manhattan Institute. 

As the Times report awakened local political activism, retail politics has solved Bell's most obvious problem: 

  • City manager Robert Rizzo (annual salary, $787,637), deputy manager Angela Spaccia ($376,288), and police chief Randy Adams ($457,000) promptly quit.
  • Protestors have marched against Bell's near-six-figure mayor and city council members, demanding their resignations, too.  

But Bell's chronic problems fester, says Gelinas.  Bell homeowners, with a per capita income less than half California's average, pay the second-highest property taxes in Los Angeles County, 34 percent above the norm.  Tax rates have soared in the past decade, and running a few overpaid hacks out of town won't solve the problem. 

Taxes will continue to climb in this poor city for one reason: debt. 

  • By the end of the credit and real estate bubbles, Bell -- population 38,000, 88 percent of whom speak a language besides English at home -- had amassed more than $77 million in direct debt.
  • The city's debt burden clocks in at nearly three times its annual revenues; debt in New York City, by contrast, is less than one and a half times revenues. 

Where does Bell go from here?  Taxes will continue to climb; one assessment tax for the pension debt has already risen by nearly 50 percent in the past four years.  Will residents be able to pay it?  Even as officials were paying themselves handsomely, they slashed public services, as public money was already finite.  Will voters be willing to pay -- or will they perceive underwriters and investors as the cynical enablers of corrupt politicians? 

Source: Nicole Gelinas, "Bell's Debt Tolls; The California city's problems go beyond a $787,637 man," Manhattan Institute, August 6, 2010. 

For text:

http://www.city-journal.org/2010/eon0806ng.html  

For L.A. Times text:

http://www.latimes.com/news/local/la-me-bell-salary-20100715,0,505985,full.story 

 

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