BRICS
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Jul 23, 2012
Several Californian cities have declared bankruptcy in recent weeks, leaving people to wonder who's next.
San Bernardino, Stockton and Mammoth Lakes were so broke they saw no choice but to file for bankruptcy. So what happens when a city goes bankrupt and could it happen over here?
In Stockton and San Bernardino, unemployment has soared and tax revenues have plunged in the wake of the nation's housing market crash, exacerbated by overspending in the boom times and general mismanagement of finances. Stockton has one of the highest home foreclosure rates in America and crime has risen.
Similarly, the City of Compton on the outskirts of Los Angeles must decide by 1 September whether to seek bankruptcy. The city of 93,000 has run up an $43 million deficit and is set to run out of cash by September. Compton's problems were exacerbated when rating agency Standard & Poor's threatened to cut its credit ratings on 13 July.
City treasurer Doug Sanders said during a 17 July city council meeting: "I have $3 million in the bank and $5 million in warrants due in the next 10 to 12 days. By then, the council will have a decision to make: don't pay the bonds, default on them, or have a serious talk about bankruptcy."
Unemployment is worse in Compton than San Bernardino, which is twice the size, but at least its pension liabilities are on a much better footing. Compton's retirement programme for municipal staff is fully funded, after an increase in property tax years ago.
This gives Compton's mayor some hope that the city can avoid bankruptcy. "Those other cities that went bankrupt all had huge pension liabilities that they couldn't meet," he said. "Even so, we're in pretty dire straits."
Another nine Californian cities are known to be in serious financial trouble and eight of them have notified the municipal bond market. Scranton, in north eastern Pennsylvania, is also buckling under its huge debts. The pay packets of all municipal workers including the mayor have been slashed to the burger flipping minimum wage of $7.25 (£4.70) an hour.
The cities that have gone bankrupt
I wonder if starting another costly war will be the solution?
Several Californian cities have declared bankruptcy in recent weeks, leaving people to wonder who's next.
San Bernardino, Stockton and Mammoth Lakes were so broke they saw no choice but to file for bankruptcy. So what happens when a city goes bankrupt and could it happen over here?
In Stockton and San Bernardino, unemployment has soared and tax revenues have plunged in the wake of the nation's housing market crash, exacerbated by overspending in the boom times and general mismanagement of finances. Stockton has one of the highest home foreclosure rates in America and crime has risen.
Similarly, the City of Compton on the outskirts of Los Angeles must decide by 1 September whether to seek bankruptcy. The city of 93,000 has run up an $43 million deficit and is set to run out of cash by September. Compton's problems were exacerbated when rating agency Standard & Poor's threatened to cut its credit ratings on 13 July.
City treasurer Doug Sanders said during a 17 July city council meeting: "I have $3 million in the bank and $5 million in warrants due in the next 10 to 12 days. By then, the council will have a decision to make: don't pay the bonds, default on them, or have a serious talk about bankruptcy."
Unemployment is worse in Compton than San Bernardino, which is twice the size, but at least its pension liabilities are on a much better footing. Compton's retirement programme for municipal staff is fully funded, after an increase in property tax years ago.
This gives Compton's mayor some hope that the city can avoid bankruptcy. "Those other cities that went bankrupt all had huge pension liabilities that they couldn't meet," he said. "Even so, we're in pretty dire straits."
Another nine Californian cities are known to be in serious financial trouble and eight of them have notified the municipal bond market. Scranton, in north eastern Pennsylvania, is also buckling under its huge debts. The pay packets of all municipal workers including the mayor have been slashed to the burger flipping minimum wage of $7.25 (£4.70) an hour.
The cities that have gone bankrupt
I wonder if starting another costly war will be the solution?
