Just since 2010, seven U.S. cities, towns, and counties have filed for bankruptcy, according to Governing.com. And many others are on the brink of insolvency.
The latest to join the ranks was San Bernardino, Calif. In August it said it had only $150,000 on hand and had depleted its reserves “years ago,” The Los Angeles Times reported.
Here is a map provided by Governing.com, displaying all municipal bankruptcies since 2010:
* Cities, towns, and counties are in red, while utilities and other municipalities are grey.
Here’s how bankruptcy affected some of these cities:San Bernardino, Calif.
Signs of problems in the southern California city appeared in 2008 when it declared numerous fiscal emergencies and reduced its workforce by 20 per cent over the next four years, according to its bankruptcy report.
Like a majority of other bankrupt municipalities, San Bernardino’s public services account for the majority of its budget—73 per cent of the general fund goes toward public safety. The city also claimed that the largest employers are local government agencies.
So what are the consequences?
Well, San Bernardino is in somewhat of a fiscal limbo. On Sept. 5 the city council failed to pass an emergency budget plan under which it would have cut 100 full-time jobs and reduced spending by $22.4 million, Reuters reported.
In addition, the city would have gotten rid of 20 firefighter positions, and three of the four fire stations would have been temporarily closed 10 days a month, according to Reuters.
“I am not going to play Russian roulette with the lives of these residents,” said a council member of the firefighter condition, according to Reuters.
Stockton, the largest American city to declare bankruptcy yet, faces a $26 million deficit. What is more troubling is its debt, which Stockton listed to be between $500 million and $1 billion, Bloomberg reported.
In the case of Stockton, the agricultural city will most likely force two groups to take cuts: public sector employees and bondholders.
Since the June 2012 filing, Stockton has somewhat been consumed by chaos. The closure of some social services means there is a steady rise in crime—violent crime and unemployment rates are among the 10 worst in the U.S., according to Bloomberg.
Shantytowns have spawned around the Stockton Shelter for the Homeless, near the city dump, according to Bloomberg.
Central Falls, R.I.
Central Falls is perhaps the most successful of the bunch. Just last week it won a court permission to exit its bankruptcy status by repaying bondholders in full, but making cuts to municipal workers’ pensions, according to Bloomberg.
“We’ve been pilfered and beaten down,” said Bruce Ogni, president of the police retirees organisation, for Reuters. “We didn’t have the power, the money, to fight it.”
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