There's a bit of a frenzy now that two cities have announced their intention this week to file for bankruptcy: Scranton, Pa., and San Bernardino, Ca. The press keeps asking, who's next? Much of that depends on the position that states take toward their struggling cities. Some are working to bail out cities that are essentially insolvent and would already be in bankruptcy were it not for state aid. But there are a few notable deadlines looming for financially troubled cities.
The lowdown on a few troubled places:
- Harrisburg, Pennsylvania's state capital, tried to file for bankruptcy last fall in defiance of the state, and a judge threw the city back out of bankruptcy. Harrisburg is now operating under the eye of a state appointed monitor but it has yet to produce a workable bailout plan, and the monitor has said the city would run out of cash again in October. Harrisburg has run out of money before, only to have the state step in to help it, but a bailout eludes the city mainly because its elected leaders want to see creditors take on a bigger share of any burden the city faces.
- In Rhode Island, Governor Lincoln Chafee noted when he signed the budget at the end of June, that, "Several Rhode Island communities are on the brink of bankruptcy." One is Woonsocket. The state legislature refused to authorize a property tax increase there, and the schools have a $10 million shortfall that triggered the city's financial crisis. The city has asked the state to take over the school system. The city is also buried in $210 million in debt, including $85 million in pension bond borrowing. A financial control commission appointed by the state is monitoring the city. Without a valid bailout plan, bankruptcy would be next, as in Central Falls, a RI city now in chapter 9.
- Politics, meanwhile, is complicating the efforts of the state to bail out the city of Detroit, which is essentially insolvent. A financial commission appointed by the state is trying to create a workout plan. The city is spending much more than it is taking in and owes much more than it could ever pay off on its own, so it needs state help, including state backing of any borrowing. But lawsuits by employee unions and the city's own corporation counsel may undermine the agreement with the state. Without the state's backing the city might start defaulting on its obligations sometime in August, city officials have said.
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