SAN FRANCISCO, June 25 (Reuters) - The small California city of Atwater has stepped away from the brink of bankruptcy with the approval of a budget that benefits from new revenue and does not rely on layoffs for the first time in five years.
Since it declared a fiscal emergency last October, the city of 28,000 was seen at risk of following Stockton, another city in California’s Central Valley, into bankruptcy court. To keep its budget balanced, Atwater had cut 40 percent of its workforce over the past five years.
Atwater’s new $12 million general fund budget approved late on Monday relies on revenue from a sales-tax hike and increased water, waste and garbage service rates, and will fund about 80 positions.
Revenue is expected to remain tight. The Central Valley was hit particularly hard by California’s housing market crash and is lagging the state’s coastal regions in job growth.
“We’ll have to monitor the budget very, very closely, but we feel we can do it,” Mayor Joan Faul told Reuters by telephone on Tuesday.
Atwater’s improved finances give city employees, who feel they have made enough concessions in recent years, leverage at the bargaining table, said Nancy Vinson, a business agent for the American Federation of State, County and Municipal Employees.
The union represents about 40 Atwater employees and will ask the city for a 3.5 percent cost-of-living-adjustment and an end to furloughs, Vinson said.
“We’ve informed them we no longer believe they have a fiscal emergency,” Vinson said. “Our position is that the concessions will go away.”
Last year three California cities filed for protection from creditors. The mountain resort town of Mammoth Lakes has withdrawn its filing, but Stockton and San Bernardino, two sizeable cities, are pressing on with their bankruptcy cases.
The judge in Stockton’s case recently found the city eligible for bankruptcy protection, allowing it to draft a plan to adjust its debts. Stockton aims to file that plan in September. San Bernardino is seeking similar court approval.