via Business Insider:
San Bernardino filed for the second largest city bankruptcy in U.S. history earlier today, after two other cities in California, including the largest bankruptcy ever in Stockton, have filed in recent weeks.
Filing for bankruptcy has become a common trend throughout the country as of late, with Jefferson County, Alabama, and Harrisburg, Pennsylvania, filing last year. The attached slideshow features the three bankruptcies that have been filed over the past few weeks as well as the cities across the country that could be headed toward a similar fate. These cities may not file for bankruptcy in the near future, but they are struggling for various reasons and the potential for future bankruptcy filings is real.
Stockton filed for the largest bankruptcy of any U.S. city in history on June 28, due to the decline in the once hot housing market and intake of debt during its boom years.
Over the past few years, the city has cut more than $90 million in spending, specifically in big portions of its police department, which has subsequently led to an uptick in crime and murder rates.
Expensive investments such as a promenade, a sports stadium, and a hotel proved costly to the city as the housing market crumbled.
Mammoth Lakes, California
On July 3, Mammoth Lakes filed for bankruptcy due to its inability to pay a $43 million breach-of-contract judgment that was brought against the city by a developer.
The city entered into an agreement in 1997 to improve nearby Mammoth Yosemite Airport and would receive the rights to develop a $400 million Hot Creek hotel project at the airport and the option to buy the land. In 2007, it was determined that the project would interfere with Federal Aviation Administration policy and derailed the town’s plans to extend the runway to accomodate large passenger jets. The developer filed and won a break of contract lawsuit, effectively bankrupting the city.
Source: L.A. Times
San Bernardino, California
(Photo by David McNew/Getty Images)
Earlier today, San Bernardino filed for the second largest bankruptcy of any city in the history United States. San Bernardino opted to head toward bankruptcy rather than making expansive cuts to its police and fire departments as Stockton had.
The city was facing a budget shortfall of $45.8 million, and as City Attorney James Penman states, “the mayor and the council were not given accurate documents [regarding the budget]”. Penman said that the documents presented to the mayor and council had been falsified for 13 of the 16 years, which masked the city’s spending and essentially exasperated the city’s financial issues.
Rockland County, New York
Rockland county has already cut 400 jobs and another 12 jobs mid-year, after Moody’s gave Rockland County a negative outlook in June due to an $18 million budget gap.
The city’s deficit is expected to grow to $95 million, and Richard Brodsky, a former New York Democratic assemblyman and senior fellow at the Wagner School at New York University, believes the city may be headed toward bankruptcy.
“It’s the step before bankruptcy. This is everybody turning their back on this problem.”
Source: CBS News
Scranton is now roughly $16.8 in the hole on its fiscal year budget. To help cut costs, the city has slashed nearly 400 public employees to $7.25 per hour, due to an inability to pay workers their standard salaries.
The city council rejected a plan that would hike taxes over 10 percent per year. A big issue in the city is an inability to explain to banks how it plans to repay loans, causing difficulties in gaining financing.
“The city has no money,” said Robert McGoff of the Scranton city council at its June 26 meeting. “It’s living day by day”
Source: The Fiscal Times
Providence, Rhode Island
At the end of May, Robert Flanders, a former state Supreme Court justice and current state- appointed receiver for bankrupt Central Falls, stated that “I don’t see how they [Providence] can get out of it without going there [bankruptcy].”
The city has a budget gap of at least $20 million and has pressured Brown University and other nonprofit organizations to help close the gap.
Moody’s cut Providence debt to Baa1, the third lowest investment grade level citing the city’s “strained finances.”
Just over a month ago, Detroit nearly went insolvent when Corporation Council Krystal Crittendon, without the consent of the mayor or council, sued Michigan for money owed to the city. The state threatened to withhold $80 million in revenue sharing if the lawsuit was not dropped, and Mayor Dave Bing along with Judge William Collete dismissed the motion. This was just the latest incident that nearly sent the city into bankruptcy, as Detroit’s economy has been crushed for due to continuing declines in business and the recent housing crisis.
The city is under watch of a nine-member advisory board as part of an agreement with Michigan to prevent it from seeking bankruptcy.
Santa Ana, California
Santa Ana’s credit rating is rated just one above jun stats by Moody’s. In an attempt to cut costs, the city is disbanding its fire department and turning it over to the county in order to save roughly $10 million per year, and over $4 million this fiscal year.
Santa Ana is beginning to tread water and is stepping off the brink of insolvency, but the city is still not completely clear of the potential for bankruptcy given its credit status.
Long Beach, California
Long Beach City College
Long Beach has renegotiated contracts with its police and fire unions to reduce pension costs, in an effort to cut spending and help the city’s $18.5 million budget deficit.
The finance director of Long Beach had this to say in regards to the Stockton bankruptcy:
“We are in tremendous pain,” John Gross, the finance director of Long Beach, said Wednesday. “Our citizens are feeling the loss of services. But that’s a big difference from Stockton.”
While Long Beach is in better shape than Stockton, it is not far from finding itself in a similar fate.
Source: L.A. Times
Costa Mesa, California
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In order to save money, Costa Mesa has sold police helicopters, slashed payrolls from 611 to 450, and is pursuing an effort to convert a chart city from a general law city, which would give Costa Mesa’s City Hall more power to outsource work.
Now, the city is investing 15 percent of its total budget toward capital improvements, doubling what it spent last year.
Source: Daily Pilot
San Diego, California
San Diego has faced pension issues for many years, and most of the proposed solutions affect newly hired employees and does little to alter the debt that is on mounting on the books.
In bankruptcy, Central Falls cut pensions for retirees, which could be an option for San Diego to solve their pension woes. Additionally, a big portion of Stockton’s bankruptcy came from a $121 million loan it took out to pay its pension in 2007, and San Diego mayoral candidate Bob Filner plans to take out a similar loan to pay off San Diego’s pension debt.
Source: Voice of San Diego
Los Angeles, California
Los Angeles faces a budget shortfall of $238 million, enormous unfunded pension liabilities, and has an annual budget of roughly $7 billion.
It is difficult to foresee a city as large as Los Angeles, the second largest in the United States, going bankrupt. Even so, it faces serious problems and is in a very difficult situation even if the city does end up filing for bankruptcy. Pension issues in Los Angeles and a majority of California are becoming more serious each and every year.
Source: CBS News
Oakland is yet another city experience serious pension issues. The city announced that it plans to borrow $211 million to pay for its pension problems, a similar issue that San Diego currently faces and that sunk Stockton.
California’s pension issues are starting to seriously trouble the state’s most populous cities, which has to be extremely concerning given the recent bankruptcies and financial troubles of the majority of the state.