How do cities go bankrupt?

[Conan The Librarian]

Do they lose assets, have a repayment plan, get forced to shut down? What about all the people who live there? Are they screwed living in a place that can't provide water, sewer, trash pickup, fire and police?
 
In other words, what does it actually mean for a city to go bankrupt?

[Will Bison]

It would depend on the State as each has different ways of establishing a "City ".

[Graybeard]

There was a city in CA that did it and it stood as the largest municipal bankruptcy in the country until Jefferson County in Alabama did it recently. I think Jefferson had a debt close to $5 Billion.

They are the most messed up place I know of. No as far as I know they lost no assets but they also didn't lose all the debt I don't think. In their case the sewer bond debt was what drove them to bankruptcy. They are the largest county in Alabama both in size and population. Why they felt they had to provide sewer service county wide when most of the population lives in cities and towns that already had sewer service is beyond me.

B'ham is our largest city and is in Jefferson county and they aren't far from bankruptcy either I don't believe. The state just took over operation of the school system there.

You could likely look up this bankruptcy on a search engine and get answers to many of the questions you might have about a municipal bankruptcy.

[mcbammer]

Ever   heard  of  WHITEFLIGHT.

[PowPow]

My understanding is that in a municipal bancruptcy, debts are forgiven, bondholders and vendors are out of luck, bond ratings are bad so that the municipality has to pay really high rates, taxes go up. The state could offer some kind of bailout.


I live in Jefferson County. Trash got picked up last Friday. Had some roots in the county's part of the sewer line; they responded in about 20 minutes and cleaned out 400' of sewer line. I expect taxes and sewer fees to go up.

[coldmold]

How about the public employees service unions constantly cutting the fat hog in the butt.
What with the high wages and super pension plans they are bankrupting citys right and left.

[jimster]

Detroit or Flint in the state where I live is a good example of places going bankrupt. Parts of the city turn into gang land, windows boarded up, crime everywhere, what few police you have are corrupt as well, some spots that used to be pretty neat now look like the movie Escape from New York"....it's an ugly thing you get with no budget controls in place.  Unions pull out and go somewhere else too...everyone leaves except the people who can't leave. Even the cops won't live in the cities, they offered them free housing to move there, very few took it. They will drive a ways to work, thanks anyway. 

Are they screwed living in a place that can't provide water, sewer, trash pickup, fire and police?

Yes, pretty much, but many that live there made their own bed, whether they know it or not. Probably best they stay there and away from where I am.  Otherwise they will wreck this area too.  They might have to fence it off someday....who knows.

[Cabin4]

Politicians and a dumb voting public cause these issues.

[magooch]

Sewage and water systems should be self sustaining if they are managed right.  However, in many cases the EPA, or the equivalent state agency puts some very stringent requirements on systems that cause expenses to spiral up.
 
Overall, I think towns and cities that have financial troubles are run by people who don't know how to prioritize and budget.
 
One of the towns I live near seems to have a fixation on traffic lights.  They could improve traffic flow and save a ton of money by turning off at least 50 percent of the lights.  They also recently have spent a lot of money revising streets that would have been better left alone.  They just don't understand the concept of "if it ain't broke, don't try to fix it."