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Thursday, March 1, 2007
WHEN A CITY GOES BUST
Yubari tries downsizing to solve fiscal crisis
The announcement in June that Yubari, Hokkaido, has effectively gone bankrupt rolled like an earthquake across Japan, jolting numerous local governments suffering their own financial problems. This two-part series examines the situation in Yubari and in Atami, Shizuoka Prefecture, which also is in dire straits.
YUBARI, Hokkaido -- Hiroshi Sato has lived his entire 77 years in this snow-driven central Hokkaido city best known for the Yubari melon brand.
But since Yubari declared in June that it is effectively bankrupt, Sato thinks he may have to bid his hometown farewell and move to Sapporo, where his children live.
One of the components of the city's financial reconstruction plan approved Wednesday by the municipal assembly is the privatization and downsizing of Yubari City Hospital -- its sole general hospital -- into a clinic in April.
"I had a stroke a few years ago. I also have an irregular heartbeat," Sato said. "It worries me that the hospital will become a clinic with fewer medical services."
Sato is just one of Yubari's 13,000 citizens likely to suffer from the city's rehabilitation efforts, which include a higher residential tax, higher nursery fees and downgraded administrative services.
With 41 percent of its population aged 65 and older -- the highest ratio nationwide -- Yubari represents what pretty much every municipality and prefecture is likely to face in a decade or two.
The rising number of elderly people, higher medical and welfare costs, a declining labor force and shrinking tax revenues, no strong industry: Yubari's problems fit into all these categories. Worse, Yubari appears to be just the most prominent case. Japan is filled with cities, towns and villages facing more or less the same crisis.
And amid such bleak prospects, the nation has yet to come up with a clear vision on where to go from here.
Yubari once prospered as a coal mining town, boasting 117,000 residents in its heyday in 1960. But as the central government shifted energy focus from coal to oil, the mining business dried up, and Yubari along with it.
When Yubari's coal mines started to shut down in the 1980s -- the last one called it quits in 1990 -- residents departed by the thousands.
To stop the population drain and create jobs, Yubari used abundant subsidies from the central government to invest in tourism. But the grandiose amusement parks and ski resorts it built turned out to be white elephants sucking the city's coffers dry.
"The Yubari brand of melon is popular, but the city failed in tourism," said Atsushi Miyawaki, a professor of public policy at Hokkaido University, criticizing the city's failure to come up with a unique selling point.
This month, Yubari is expected to be designated by the Internal Affairs and Communications Ministry as a "municipality under rehabilitation." This means its budget will be strictly monitored by the ministry, effectively stripping the city of its autonomy.
Under the ministry's instruction, Yubari has already drafted an 18-year financial reconstruction plan lasting through fiscal 2024 that includes increases in residential and fixed property taxes and sewerage fees to pay off its 35.3 billion yen debt.
The city will shut down a library and a museum. Worse, some of its seven elementary and four junior high schools will have to close, lengthening the daily commute for many students.
For a two-child couple in their 40s earning 4 million yen a year, the annual financial burden, including tax hikes and increases in various service costs, will be 165,880 yen higher by 2016 than it is now.
But the biggest cost-cutting effort -- and one that will be keenly felt by all residents -- will be slashing the number of city personnel and their salaries.
Of about 300 municipal officials, 152 are expected to quit voluntarily by the end of March, including 54 of 57 in managerial positions. The city eventually plans to cut the total down to around 90.
Their salaries will be cut by an average of 30 percent, reducing their average annual income from 6.4 million yen to 4 million yen.
Tsukasa Atsuya, chief of the municipal workers' labor union, said most city employees departing at the end of the month have not yet found new jobs.
"Not one of them will quit because they want to," he said. "Those who decided to remain are worried about losing their job in the future."
The city doesn't know how it is going to manage nearly the same amount of administrative work with half the staff starting April 1.
"I guess there will be a lot of confusion," said Hisashi Hirano, a spokesman for the city. "The quality of administrative services will deteriorate temporarily and there will be inconvenience in our daily lives."
For example, the city plans to close down five branch offices where residents can pay taxes or receive copies of their family register. The city used to clear snow from the roads when it reached 10 cm deep; now it will wait until 15 cm has accumulated. The city also plans to charge residents for garbage collection.
Meanwhile, Yubari's failure has had a ripple effect on neighboring municipalities in Hokkaido. They feel a growing sense of crisis that they might be the next to go under, said Yutaka Kawamura, a Hokkaido prefectural official in charge of financial reconstruction.
"Financial conditions in many of them are severe," Kawamura said. "But because of Yubari, they've started carrying out drastic cost-cutting measures before it's too late."
Experts point out small cities and towns are not the only ones suffering from financial problems. Even large cities such as Sapporo and Yokohama are facing severe financial issues.
Hokkaido University's Miyawaki said large cities often suffer greater financial burdens because elderly people are increasingly moving into them to take advantage of better social services.
To address the problems facing local governments, Miyawaki said the central government must promote decentralization so measures can be mapped out by officials intimately knowledgeable about local conditions.
"For example, cities with a high percentage of elderly and those with a lower percentage will need different welfare policies," he said. "As needs of municipalities vary, they require more flexibility in creating their own policies" instead of adhering to policies imposed by the central government.
Apart from government action, or inaction, how everyday people react will play a big role in the revival of troubled cities.
In the case of Yubari, where subsidies for community and cultural events will be abolished, residents have begun working on their own to revive some of the events the city used to sponsor.
Naoya Sawada and nine others formed a nonprofit organization and are now trying to raise funds to organize Yubari's annual international film festival this summer.
The Yubari International Fantastic Film Festival, an annual event that attracted tourists since 1990, was called off last summer when the city couldn't afford the 100 million yen price tag for organizing the event.
"I hope the event will help revive Yubari," said Sawada, despite the uphill battle he faces in finding sponsors and getting distributors to show their movies at the festival for a lower fee. "We need to publicize Yubari through the film festival."
For the second story in this two-part series
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