Cities and communities in the United States are facing bankruptcies as economies bottomed out during the stock market crash and housing boom bust. Many of them are working hard to pick up the pieces and become the great places to live they once were.
When Cities Go Bankrupt
Cities file for bankruptcy when they overextend on salaries, pension and retirement plans and grow city services to a point where paying for them puts the budget in the red. In order to cut expenses and work back to being solvent, city leaders cut jobs and trim city services. Property tax revenue declines when homes are not being sold. If homes are not being sold, there are no citizens buying goods for them and generating sales tax income for the city. These are a few reasons why cities find themselves in debt and look at filing bankruptcy.
Finding a Way Out
There are a few ways to get out of the red. Bankruptcy is one and usually is the quickest way even if the city or community creditors do not like it. Cutting jobs, therefore cutting salaries, retirement plans and benefits is another. Although, in the end, this does not help all that much as people move someplace else which is less expensive to live. This is all done in the name of restructuring. In the end, it helps but it is painful for everyone until the area is more financially healthy.
Community Pitch-In Days
If we love the community we reside in, we should offer to pitch in doing something we know how to do. The City of Vallejo, California is proud that its residents offered to help clean up graffiti, started new neighborhood watch programs to aid a reduced police force, and patrol for code violations during its bankruptcy and restructuring. Other things residents can do are plan street cleaning days, approving sales tax hikes and spending discretionary money in town.
Rising from the Red
City budgets, like household ones, must be balanced in order for the city to rise from the red and become solvent again. Often, the community is put under different and impartial financial management by the bankruptcy judge and has to prove that the budget is balanced every quarter. Once this is done for a year or more, the judge can hand financial responsibility back to city leaders. But to get there, cities need to look at Vallejo, one of the largest to file for and come out of bankruptcy, to see how I was done and learn from it. Rising from the red takes time and sacrifice from everyone who lives and works in city or community.
Tiny Towns and Big Cities All Face Budget Cuts
While some of the big cities in California are facing municipal budget slashing, smaller towns are also getting hit. Rhode Island is a small state and one of it tiniest towns Central Falls emerged from bankruptcy recently, but not without some painful scars. City pensions were slashed, the number of city jobs was cut and city leaders did not have control over their domain. But in the end, the tiny town of a little more than 19,000 people made it back. It took a little more than a year, but the town is back on its feet on its own again. This is the lesson every American city and town should learn.