Skip to comments.16 Cities Likely to Declare Bankruptcy
Posted on 03/07/2012 10:00:02 AM PST by doug from upland
16 Cities Likely to Declare Bankruptcy Posted @ 1/12/2011 5:30 AM By Money Tree Posted in [Budget & Spending] | 2 Comments
Will 2011 be the year of municipal default?
Here is a list of 16 cities likely to face bankruptcy, as reported by Business Insider.
San Diego, Ca.
Deficit through June 2012 : $73 million
Budget in FY2011: $2.85 billion
Annualized gap: 1.7%
The city's official have tried curbing the deficit by increasing sales taxes, but residents of the city strongly oppose this and have voted it down.
San Diego already cut over $200 million over the past two years, so these cuts won't come easy.
New York, NY
Deficit through June 2012: $2 billion
Budget in FY2010: $63.1 billion
Annualized gap: 2.1%
Estimates of the NYC deficit range from $3.6 billion according to Comptroller John Liu to around $2 billion according to the Independent Budget Office. Everyone agrees that the deficit will be worse if New York state cuts aid as part of its own deficit reduction plan.
Mayor Bloomberg has already started to address the FY2012 deficit, calling for layoffs in all city agencies, closing 20 fire departments at night, and reducing services for seniors, libraries and cultural centers.
San Jose, Ca.
Deficit through June 2012: $90 million
Budget in FY2010: $2.7 billion
Annualized gap: 2.2%
After an audit of the San Jose police department, city officials found it to have too many high paid supervisors, costing the city too much money. The answer to this is converting some of those upper ranked officers to patrol positions. This could reduce the city's debt by $33 million.
Last year's deficit was $116 million, leading to brutal cuts including nearly 900 layoffs.
Deficit through December 2012: $60 million
Biennial budget FY2009/2010: $2.5 billion
Annualized gap: 2.4%
Helping the budget in Cincinnati depends largely on changes in the police and fire departments. The city can either get $20 million in concessions from the two unions, lay off 216 firefighters, or outsource the police force to neighboring city, Hamilton.
Deficit through June 2012: $100 million
Budget in FY2011: $1.8 billion
Annualized gap: 3.7%
Mayor Peter Carlisle said police officers and fire fighters will be asked to make concessions in the upcoming budget and he will also end furloughs of two days per month for public workers. This will require the 2,900 officers to give back their 6% pay raises they have received in each of the past four years.
Last year Honolulu raised some property taxes to fill a huge $140 million deficit.
San Francisco, Ca.
Deficit through June 2012: $380 million
Budget in FY2011: $6.55 billion
Annualized gap: 3.9%
Mayor Gavin Newsom says this year's deficit is completely manageable. Last year's deficit approached $500 million and the city did not need to lay off any police or firemen. While Newsom's term is coming to an end, he says he and his colleagues will leave detailed options for the incoming mayor.
Last year's cuts were even larger, eliminating a $438 million deficit. The city is down to the bone.
Los Angeles, Ca.
Deficit through June 2012: $438 million
Budget in FY2011: $6.7 billion
Annualized gap: 4.4%
The Los Angeles City Administration Office plans to cut 225 civilian positions in the LAPD, reduce firefighting staffing, and eliminate a dozen positions in the City Attorney's Office and General Service Department. The deficit will only get worse unless an effort to privatize parking garages is approved. If not, the city will require more layoffs, furloughs, and curtailed hiring.
Last year's deficit was even larger, totalling nearly $700,000.
Deficit through September 2012: $688 million
Budget in FY2011: $8.89 billion
Annualized gap: 4.4%
Council member Tommy Wells proposed tax rate increases which were voted down, but Wells says he will continue to push his proposal. Wells' proposal seems reasonable as residents making $100,000 a year would only pay $63 more in taxes per year. This is a small price to pay that would benefit the city immensely.
Deficit through December 2011: $30.5 million
Budget in FY2010: $677 million
Annualized gap: 4.5%
Newark's deficit was $83 million before Mayor Cory Booker initiated a plan to sell city-owned buildings, raise property taxes to 16 percent and decimate the police force. Nontheless, Moody's cut Newark's rating to A3 citing its $30.5 million remaining deficit.
Deficit through June 2011: $85 million
Budget in FY2011: $3.1 billion
Annualized gap: 5.5%
Detroit's city government has cut costs with layoffs and by leaving currently vacant positions open. Mayor Bing's emergency fiscal plan includes demolishing houses and cutting police and trash services to 20% of the city.
Last year the city council pushed through severe cuts to fill an over $700 million deficit.
Deficit through December 2011: $7.5 million
Budget in FY2010: $120 million
Annualized gap: 6.3%
One of Pennsylvania's several distressed municipalities, which receive state aid, Reading has been running an operating deficit for years. In September the city council said their deficit was bigger than expected, soaring to $7.5 million for the current year, which means they will have to borrow around $17 million from the state to pay off total debts.
Deficit through December 2011: $21 million
Budget in FY2010: $274 million
Annualized gap: 7.7%
Last year, the city increased property tax by over 12 percent and hiked water and sewer rates by 45 percent over three years to help with the deficit. The city council also cut police and public sector jobs.
Deficit through December 2011: $26.5 million
Budget in FY2010: $178 million
Annualized gap: 15%
Despite holding title of second most dangerous city in America, Camden recently received approval to lay off half of its police force.
Deficit through June 2012: $4.7 million
Budget in FY2011: $18 million
Annualized gap: 17%
City manager Bill Cooper was denied permission to declare bankruptcy. He says the city is owed millions of dollars in tax dollars from Detroit from a shared facility. The state offered the city a loan to stave off bankruptcy.
Cooper says he has already cut almost everything possible, going so far as to lay off the city's five crossing guards.
Hamtramck might avoid bankruptcy, but also-broke Michigan can't afford many of these deals. That's why Gov. Rick Snyder predicts "hundreds of jurisdictions" going bankrupt in the next four years.
Central Falls, RI
Deficit through June 2012: $7 million
Budget in FY2011: $21 million
Annualized gap: 22%
Central Falls has been put in state receivership due to critical budget problems. State-appointed receiver Mark Pfeiffer thinks the best solution is for Central Falls to be annexed by its neighboring city, Pawtucket.
Deficit through December 2011: $54 million
Budget for FY2010: $225 million
Annualized gap: 24%
As a "last resort," Paterson is considering laying off 30 percent of its police force, said councilman Steve Olimpio. This will put 150 police officers out of work.
BONUS: Chicago, Il
Deficit through December 2011: $654 million Closed
Budget in FY2010: $6.8 billion
Annualized gap: 9.6%
Mayor Richard Daley has balanced the budget, but absolutely ruined Chicago finances from here on.
His FY2011 plan uses up nearly the entire revenue from a long-term lease of the local parking system and airport, which he passed in 2008. The multi-billion lease deal was supposed to last for decades, but it only lasted two years. The best hope for the future is building a city-owned casino.
After a city declares bankruptcy, it will usually cut pensions for retired city employees, more layoffs, etc.
The most serious problem for a bankrupted city is that it is hard to attract new investments and people would be scared to go to that city. Tourism will be greatly impacted because of the bad image.
While there have been US cities going bankrupt, there is no U. S. state which has declared bankruptcy. However, according to a recent report by the New York Post, California Governor Arnold Schwarzenegger came to Washington earlier last year to get seven billion dollars for his state government, which resorted to paying off vendors with scrip and delaying state income-tax refunds. Illinois seems to be in even worse shape. A recent credit rating showed Illinois weaker than Iceland and only slightly stronger than Iraq.
Can we expect the bond market to quit financing California and Illinois long before the federal government. It may already be happening.
Individual investors have been selling off state and local municipal bonds.
How long will it be before cities and other states on the verge of bankruptcy come to Washington with their hands out asking for a bailout? California and Illinois, facing 25 billion dollars and 15 billion dollars deficits, are the most likely. But what about Chicago?
The Obama administration may be sympathetic. It's channeled stimulus money to states and TARP money to General Motors and Chrysler in large part to bail out its labor-union allies, the report said.
But the Republican House isn't likely to share that view, and it 's hard to see how tapped-out state governments can get 60 votes in a 53-47 Democratic Senate, according to the paper.
Law professor David Skeel, writing in The Weekly Standard, suggests that the US Congress pass a law allowing states to go bankrupt.
And the current mayor is under ‘x’ investigations, including one that his mistress was caught buying lobster with her welfare debit card. Good stuff, eh?
Care to guess the nationalities of the aforementioned? They haven't caught on to the “no assumed right to other peoples money” yet.
“9 to 5” vibrant, gotcha! Crime is under- or unreported here too. A LEO acquaintance has told me several times, the things that aren't reported are frightening. Of course, if one is an illegal, well, what's going to be done to you?
Like the song goes: “Everything free in America!”
the taxpayer is forced to work longer, harder and pay more taxes so govt em employees can retire early with a fat pension and health benefits....
Add the cities’ debt to the federal 17 trillion and the states’ debt, consumer debt and how much is that? We are living on debt. Obama piled on 5 trillion more on us already. Anyone think this won’t lead to collapse?
People have been dealing with Newark long enough to know better about a city “making a comeback” and similar nonsense spouted by politicians/businessmen lying to keep productive people spending money there after dark; too many of the people in the surrounding suburbs (or their parents) used to live in Newark until it fell back in the 1960s.
The surrounding areas are very...aggressive...in their police work.