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The assembly of Yubari, a bankrupt city in central Hokkaido, on March 2 adopted a financial reconstruction plan to pay off accumulated debts of ¥32.2 billion over 17 years. The plan also features 74 new projects to resuscitate the city and improve services for residents. To persevere through a long, difficult process of financial reconstruction, the city and its residents will need to call on their ingenuity. At the same time, the central government and the Hokkaido government must be prepared to give helping hands to the city.

Yubari was once a prosperous municipality. In 1960, Yubari had a population of more than 110,000 and was thriving on coal mining. But the conversion of Japan’s main energy source from coal to oil led to Yubari’s decline. After its three coal mines closed, the city tried to revive itself by making large investments in tourism-related facilities. But debts kept piling up until they finally bankrupted the city.

In January 2007, the city announced a plan to repay accumulated debts of ¥35.3 billion over 18 years. In March that year, Yubari became a “municipality under rehabilitation” — it had to begin a special fiscal rehabilitation process under the supervision of the internal affairs ministry.

On April 1 that year, the 18-year plan began. So far, the city has repaid ¥3.1 billion. The plan adopted March 2, based on a June 2007 law designed to prevent bankruptcy of local governments, represents a revision of the earlier plan.

Many other municipalities are saddled with a huge debtload. In October 2009, the internal affairs ministry examined the fiscal 2008 closing accounts of local governments across the nation and found that 21 municipalities in 12 prefectures were in debt so deep that they fell into a special category of municipalities that had to work out financial reconstruction plans. Their financial conditions were rated slightly better than a “municipality under rehabilitation.”

As the nation’s only “municipality under rehabilitation,” Yubari will start the financial reconstruction process under the new plan April 1. With the consent of the internal affairs minister, it will be allowed to issue special bonds to deal with the debt.

The Yubari city government’s draft of the new plan had envisaged paying off a ¥32.2 billion debt over 19 years. The city was able to shorten the period to 17 years because the central government decided to beef up the amount of grants in aid to local autonomous bodies suffering from rapid population decline. The Hokkaido government agreed to lower Yubari’s interest burden on the debt.

Yet, the path toward financial reconstruction will not be a smooth one. Yubari’s population has decreased about 10 percent since March 2007 to some 11,300. People aged 65 or over account for more than 43 percent of its population, the highest percentage in Japan, while children younger than 15 years of age account for less than 8 percent of the population, the lowest in the nation.

The Yubari city government’s population estimate for coming years is not bright. It expects the city’s population in 2030 to be about half the present level, with people aged 65 or over accounting for nearly 50 percent of the total population. Communities scattered within the 763-square-km area of the city may have difficulty surviving.

As part of its efforts to economize, the city will slash the monthly salaries of city government workers by an average 20 percent, making their wage level the lowest in Japan. Due to the declining population, four middle schools will be integrated into one from April 1 this year and seven primary schools into one from April 1, 2011. The municipal tax, which had been raised, will remain at the current level.

In an attempt to revitalize the city, 74 new projects will be carried out, including construction of a raw sewage treatment facility. Many of the projects involve the renovation of aging facilities such as the municipal clinic and public housing that used to be the residences of coal miners. Construction of the sewage treatment facility will incur a new fee.

Three of the four full-time doctors at the clinic are scheduled to quit by the end of March. Some residents express the fear that the financial reconstruction plan does not offer a future vision for the city. In such a situation, it will be all the more important for the city government, the assembly and citizens to work together to enliven their local communities.

The city, which is slightly more than an hour’s ride by car from Chitose airport, could invite in enterprises. It could also utilize its tourism resources. The central and Hokkaido governments should flexibly help the city with measures for improving residents’ quality of life and for encouraging economic activities.

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