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Wednesday, March 7, 2007

Bankrupt Yubari embarks on plan to dig itself out of hole


Staff writer

The Internal Affairs and Communications Ministry designated the city of Yubari, Hokkaido, officially bankrupt Tuesday, canceling its autonomy and paving the way for rehabilitation under central government control.

News photo
A snow-capped statue of a coal miner stands in front of the closed Coal Museum here Feb. 7. The once prosperous coal mining town began a government rehabilitation program Tuesday. AP PHOTO

It is the first time in 15 years the government has declared a municipality bankrupt. The last time was in 1992, when Akaike, Fukuoka Prefecture, was designated as being in dire financial straits. Akaike renamed itself Fukuchi after merging with neighboring towns last year.

Yubari Mayor Kenji Goto received a letter of acceptance for the city's reconstruction plan from internal affairs minister Yoshihide Suga at the Diet building Tuesday morning, putting the city under strict state supervision.

"Our financial reconstruction process will start from here," Goto told reporters. "It is a severe plan for Yubari citizens, but from now on I will do my best so that the city and its people will be able to rebuild together."

Goto apologized for concealing the city's debt transfers, which allowed it to hide the snowballing debts in its accounts. He said City Hall would increase budgetary transparency to prevent further irregular accounting.

Despite his remarks, Goto's term as Yubari mayor is over at the end of April. Although local business groups have been asking him to run for another term in the mayoral election on April 22, he has not yet made a decision.

"By making my utmost effort to draft the reconstruction plan, I think I have partially fulfilled my responsibility as mayor," Goto said, adding he will make up his mind on whether to seek another term later this month.

Yubari's reconstruction plan envisions a 35.3 billion yen reduction in debt over an 18-year period starting in April. The reduction will be achieved by raising taxes, shedding public servants, charging for garbage collection and merging the city's elementary and junior high schools.

For a two-child couple in their 40s earning 4 million yen a year, the annual burden of living in Yubari -- with tax hikes and various service fees -- will cost 165,880 yen more by 2016.

Hokkaido will loan about 36 billion yen to Yubari at 0.5 percent interest for its financial rehabilitation. The prefecture will also dispatch officials to the city and shoulder the cost of distributing medical benefits.

Yubari's budget will be strictly monitored by the internal affairs ministry, which is to receive an annual report from the city each September. Yubari has to consult the central government when it needs expenses beyond that permitted under the framework of the rebuilding plan.

In exchange for giving up its autonomy, however, Yubari will be allowed to issue local government bonds. Yubari's reconstruction plan was drafted under the presumption that its population will drop from 13,000 to around 7,300 by 2025, when the reconstruction plan is due to end. But observers say the exodus will probably accelerate because its bankruptcy is likely cause a drop in tax revenue. The current population is just over 10 percent of its peak before coal mining ended.



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