Eight More U.S. Cities on the Verge of Bankruptcy
Interest-Rates / US Debt Jul 24, 2013 - 01:30 PM GMTBy: Money_Morning
Detroit is the largest municipal default in the history of the US. The city owes $9.2 billion in pensions, $1.9 billion to creditors and is $18.5 billion in debt.
The city's infrastructure is collapsing. Almost half of its streetlights are not working and aren't being repaired.
The average time for Detroit police to respond to an emergency is just under an hour. Crime has spiked. Many in the city have resorted to carrying firearms for their personal protection.
The city bankruptcy epidemic is likely to spread around the country, resulting from years of overspending on wages and pensions in order to keep public employee unions happy and city politicians re-elected.
We take a look at eight U.S. cities on the verge of bankruptcy:
Washington, D.C.
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City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
Washington, DC |
599,657 |
$322 million |
$9.6 billion |
3.4% |
$537 |
11.1% |
Mayor Vincent Gray said, "My budget will inflict some pain, it's a tough budget and I won't represent it as anything else." Still Gray's budget will leave D.C. in the red and as tough as he reports it is, it isn't nearly tough enough to make any dis lasting difference.
The city council just passed what they call a "Living Wage" that has cost the District 2,000 jobs and maybe more.The "Living Wage" forces employers to pay a minimum wage of $12.80 per hour, instead of $7.25 national minimum wage. This won't help the city's finances as more businesses migrate to neighboring Virginia and Maryland. The unemployment rate for D.C. will likely go even higher than 11%.
Camden, NJ
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City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
Camden, New Jersey |
517,234 |
$28 million |
$138 million |
20.2% |
$54 |
11.1% |
Mayor of Camden, Dana Redd in her 2011 budget proposal called for severe budget cut backs that led to nearly one-sixth of all city employees losing their jobs. This included almost 50% of the police force and 33.3% of the fire department. Public employee unions claimed the mayor's cuts would turn the city into a, "living hell". The truth is Camden in many ways is in even worse financial shape than Detroit.
Cincinnati, Ohio
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||||||
City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
Cincinnati, Ohio |
331,285 |
$60 million |
$1.2 billion |
20% |
$181 |
8.7% |
In the City of Cincinnati mums the word when it comes to the city's budget. Mayor Mark Mallory's lack of any statements concerning the deep troubles in his city led many to believe his intention is for the city to file for bankruptcy.
Making matters worse is the latest news that Moody's has downgraded the city from an Aa1 rating to an Aa2 rating. Although the rating is still the third highest rank given by Moody's, a new warning of another possible downgrade has given many cause for concern.
San Diego
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||||||
City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
San Diego |
3 million |
$56.7 million |
$2.8 billion |
2% |
$19 |
10.2% |
San Diego is in a deep hole.
Even with severe cuts to public and higher education sectors and even with fire engine cutbacks, San Diego remains fiscally unstable.
Blackouts plague the fire stations. Thousands of blackouts moved through different stations to save $11.5 million in the current fiscal year. Recreation center hours were cut back to 20 hours a week. Almost 80 full-time positions were cut, saving $6.5 million. The city proposed 6% pay cuts for employees across the board and has permanently cut 120 full-time positions.
San Jose, California
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||||||
City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
San Jose |
894,943 |
$115 million |
$2.5 billion |
4.6% |
$128 |
10% |
San Jose Mayor Chuck Reed said, "Whether or not we declare an emergency, we're in an emergency. We just laid off police officers. Last year, we laid off firefighters. We've closed libraries, community centers. We are in an emergency and we need to take action."
Reed also looks to close the deficit by reducing services and controlling the cost of retirement.
San Francisco
|
||||||
City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
San Francisco |
808,976 |
$380 million ($480mil for '12-'13, $642mil for '13-'14) |
$6.8 billion |
5.5% |
$470 |
9.7% |
San Francisco Mayor Edwin Lee saved $20.2 million by enacting a hiring freeze.
The mayor's $6.8 billion budget proposal is aimed to close a $380 million shortfall caused by growth in employee benefit costs and loss of revenues from the state and federal governments. Whether or not this is enough to "right the ship" is anybody's guess. It could be too little too late!
Los Angeles
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||||||
City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
Los Angeles |
9.8 million |
$457 million |
$6.9 billion |
6.6% |
$46 |
13.3% |
Mayor Antonio Villaraigosa has initiatedhuge cuts to the police and fire departments, while also cutting the Recreation and Parks Department.
Los Angeles cut 10% from homeless programs, as well as permanent cuts to city spending.
The California cities mentioned here are not the Golden Statecities teetering on the brink.
Baltimore
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||||||
City |
Population: |
Deficit through 2012: |
Budget in Fiscal year 2012: |
Annual Budget Shortfall: |
Deficit per Capita: |
2011 Unemployment Rate |
Baltimore |
599,657 |
$745 million |
$2.2 billion |
15% |
$50 |
9.4% |
Baltimore Mayor Stephanie Rawlings-Blake knows she has a serious problem. To better understand her dilemma she hired a specialist to discern what the problems are and how to address them.
Then she promptly spent $650,000 for video cell phones for the city councill. According to Census data the median income in the city is $40,000, and 22 percent of the city's residents live in poverty.
The city is plagued with 16,000 vacant properties. Baltimore has the highest property taxes in Maryland -- twice as high as in neighboring Baltimore County. With the city hemorrhaging 5% of its residents annually to neighboring Baltimore County there simply isn't enough income to match revenues with the growing budget deficit.
Try as they may, the numbers are not working for any of these eight cities.
It is impossible for them to pay pensions and keep up with normal maintenance to the infrastructure with the revenues they receive.
Combine their high taxes and unemployment with loss of population and jobs spell doom for these cities. Many more are waiting in the wings.
So stay tuned!
City bankruptcies have the potential to roil municipal bond markets. Read what the Detroit bankruptcy means for municipal bonds.
Source :http://moneymorning.com/2013/07/23/eight-new-cities-on-the-verge-of-bankruptcy/
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