City of Fresno to Lay Off 225 City Employees

The City of Fresno announced today that the City has to layoff 225 employees. This is going to be a huge blow to a lot of people, but it is almost certainly necessary due to the current economic climate. Cities get the bulk of their revenue from two sources: (1) property taxes and (2) sales taxes. When property values decrease and the economy is stagnating (and sales are, therefore, lower) both of these revenue sources shrink. During the past two years, we have had an almost unprecedented decline in property values. Fortunately, the run-up in property values was limited by Proposition 13, so only non-residential property and homes that had been sold had the inflated values. With that being said, the financial hit has been pretty drastic. At least Fresno is taking bold and decisive action, unlike Los Angeles, which seems more bent on taking political shots than actually solving the problem.

I anticipate that many of these laid off employees will have a difficult time finding re-employment, at least at their previous income level. Many will likely need to file bankruptcy, whether it be to get rid of credit card debt or to save a home (and maybe strip a second mortgage) in Chapter 13. Hopefully, those former employees, like the City itself, will be able to reinvent themselves and come out of the current crisis in a better financial position than they are in today.

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