Thursday, July 25, 2013


Economics:After Detroit bankruptcy,will other cities follow?

Detroit Mayor David Bing says his cash-strapped city may be the largest to file for Chapter 9 bankruptcy, but it won't be the last.

Detroit bankruptcy: Detroit is the largest U.S. city to file for Chapter 9.
Detroit is the largest US city to file for Chapter 9 bankruptcy protection, but others could follow.

Detroit is the largest US city to file for Chapter 9 bankruptcy protection, but others could follow.
When Detroit filed for Chapter 9 bankruptcy protection last week, citing $18 billion in debt and unfunded liabilities, it became the largest American city to do so.

But the Motor City wasn't the first, and its mayor says it won't be alone.

"We’re not the only city that’s going to struggle through what we’re going through," Detroit Mayor David Bing said on ABC’s "This Week."

 "There are over 100 major urban cities that are having the same problems we’re having. We may be one of the first. We are the largest, but we absolutely will not be the last."

Here are a few other cities that, according to The Wall Street Journal, have been saddled with dire financial problems for some time:

• Harrisburg, Pa.: The Pennsylvania capital tried to file for Chapter 9 bankruptcy protection in 2011 to get out of its $300 million-plus outstanding debt, but a federal judge ruled against the petition, saying it wasn't allowed under state law.

The city's financial crisis stemmed from its failure to pay the debt on a trash-to-energy incinerator that was financed with municipal bonds.

The city said on Wednesday it has reached an agreement to sell the incinerator to Lancaster County Solid Waste Management, a quasi-public authority.

State-appointed receiver William Lynch said finalizing the sale would be a significant step in preventing another bankruptcy filing, Reuters reported.

Fresno, Calif.: This agricultural city of about 500,000 in the San Joaquin Valley has been beset by annual deficits and, according to the Journal, faces huge pension liabilities and a growing debt load.

Fresno has a $16 million deficit this year, and its credit outlook was given a negative mark in January by Standard & Poor’s "due to our view of the city’s significantly deteriorated financial position," according to USA Today.

Woonsocket, R.I.: The Journal said this city in Providence County is hurting from pension obligations. Earlier this year, state officials projected the pension plan could run out of money by 2021. reported that the city is also beset by a severe cash crunch and a $3.4 million deficit in the current fiscal year.

 "If enough of it piles on, it could push us to the edge," John Ward, the City Council president, was quoted as saying.


A Wall Street Journal opinion column this week said these major cities are also teetering financially:

Chicago: Moody’s Investors Service last week downgraded Chicago's credit rating on general obligation bonds, citing the city's "very large and growing" pension liability. Chicago has about $8.2 billion in debt, and the downgrade means it will cost more for the city to borrow money. "Chicago is also fast approaching a day of reckoning," the Journal said.

Oakland, Calif.: The Journal called Oakland a West Coast version of Detroit. Plagued by high crime and lower revenue, the city has been forced to cut police and other services to pay for retirement benefits and pension-obligation bonds, the Journal said.

Philadelphia: About one-fifth of the city's budget now goes to fund pensions, according to the Journal. Detroit's collapse could drive up borrowing costs for Philadelphia by several hundred thousand dollars a year, according to

But the City of Brotherly Love isn't another Detroit, writes Joel Mathis in The Philly Post. Philadelphia was never a one-industry town, and the bond rating agencies think the city is managing its finances adequately, he wrote.

Other cities that have been mentioned in recent media reports as financially wobbly are Los Angeles; Cincinnati; Camden, N.J.; Minneapolis; Portland, Ore.; and Santa Fe, N.M.


Municipal bankruptcy filings remain rare, despite the recent severe recession.

According to Governing magazine, only seven other cities, towns or counties have filed for bankruptcy since 2010: San Bernardino, Calif.; Mammoth Lakes, Calf.; Stockton, Calif.; Jefferson County, Ala.; Harrisburg, Pa.; Central Falls, R.I.; and Boise County, Idaho. Three of those filings — Mammoth Lakes, Harrisburg and Boise County — were rejected. Governing said just 0.06 percent of general-purpose local governments filed for bankruptcy protection over the past five years.

Clarence Anthony, executive director of the National League of Cities, said there were only 54 municipal bankruptcy filings from 1970 to 2009, and only four of those were cities or counties.

"NLC research has shown that cities nationally are better off financially than they were just several years ago. Detroit should not be seen as emblematic of cities or as a harbinger of what's to come," he said in a statement.
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