The crises aren’t all related to the mortgage and market
meltdown, but tight credit is increasingly pressing
municipalities to consider fi ling for bankruptcy.
BIRMINGHAM BOONDOGGLE
Spiral traces to county’s
borrowing on balloon
loans in the early 2000s.
on the Edge
troubles, either. New York City
is dealing with a $4 billion
revenue shortfall; Los Angeles
and Chicago both have budget
gaps of $400 million; and
San Diego and Orlando are
credit and revenue problems increasingly diffi cult of late. ent approaches,” Hoene says. looking to cut millions from
exacerbated by onerous new Hoene points out that, for “Some cut budgets across the their budgets.
contracts for public workers. the fi rst time in 20 years, board; others prioritize police, Experts such as Hoene
“All of these are very indi- property taxes, sales taxes, and fi re, and roads and try to pro- say that, although they don’t
vidualized circumstances,” income taxes are all falling at tect them for a couple of years. expect to see waves of munici-
Chris Hoene, director of the same time. And because Cities are 18 to 24 months pal bankruptcies, they expect
policy and research at the those three sources compose behind in terms of revenue, situations to continue to dete-
National League of Cities, the bulk of municipal bud- so they know the worst is still riorate before they start to
tells Newsmax. “Most recent- gets, that drop in tax revenue ahead of them. They’re trying improve.
ly, starting in the 1990s, has created a serious dilem- to fi gure out what to do in fi s- “I’m waiting to see how
we’ve seen these kinds of ma: cut services or raise fees. cal 2010, 2011.” deep this will go,” Hoene says.
risky fi nancial investments. “We’re still in the stage It’s not just smaller cit- “I don’t think we’ve seen the
Orange County was a good where we see lots of differ- ies and counties facing these bottom yet.”
example,” Hoene says. “These
places are exposed to risksks
TOWNS IN BIG TROUBLE . . .WNS
Jefferson County, Ala.
that they haven’t been beforefore
What: Facing the possibility
New York City Vallejo, Calif. of the largest municipal
with these new mechanisms
What: A $4 billion budget What: Filed for Chapter bankruptcy in U.S. history.
for raising money.” shortfall in next two years. 9 bankruptcy in May.
Why: Nightmarishly long
That willingness to
Why: The fi nancial crisis Why: A combination of sewer project that racked up
take on additional and
has hammered Wall falling income tax and $3.2 billion in debt, combined
different kinds of debts
Street, causing job losses, property tax revenue with allegations of corruption
which has led to lower tax and rising salary costs and numerous indictments of
has put pressure on state
revenue. for city workers. public offi cials.
and local offi cials to keep eep What now: The city is What now: The city
What now: The county
revenues up so that they
ROTTEN COREROTTEN CORE
planning to slash 3,000 is in the process commission was to decide in
will be able to service their
3,000 city jobs
municipal jobs and is of reorganizing its December whether to fi le for
debts. But that has become
may be slashed. seeking federal aid. fi nances. Chapter 9.
JANUARY 2009 / NEWSMAX 19
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