Free Republic

Think Motown is the only major U.S. city in a boatload of financial trouble? Think again. Detroit’s bankruptcy filing sent shivers down the spine of municipal bondholders, government employees, and big-city urban residents all over the country. That’s because many of the 61 largest U.S. cities are plagued with the same kinds of retirement legacy costs that sent Detroit into Chapter 9 bankruptcy this summer. These cities have amassed $118 billion in unfunded healthcare liabilities. These are legal promises to pay healthcare benefits to municipal workers beyond the employee contributions to finance those funds. This is a giant fiscal sinkhole—and...

Of the 7,800 bonds in the U.S. secured by state or local governments, only 25 are currently speculative-grade, or junk-bonds, rated by Moody’s Ba1 or lower. Only municipalities received such low ratings, and the reasons vary. Moody’s report, “A Look at Speculative-Grade Local Governments in the Wake of the Recession,” details the economic issues that have lead each into junk-bond territory. 24/7 Wall St. has analyzed the nine worst cities, whose credit rating is Ba2 and lower. Each of these municipalities faces a unique situation, Moody’s explains, and the list is not indicative of a greater trend. Most municipalities, Moody’s...

Although national attention has largely focused on state budget battles like Wisconsin's union showdown and Minnesota's state shutdown, the real spending struggle is actually taking place at the local level. As federal stimulus money runs dry, states are scaling back on municipal aid and revenue sharing. The cuts are adding immense pressure to strained local governments, many of which are already struggling under huge debt burdens. After years of declining tax revenues, cities and towns across the country are now running out of ways to deal with their ballooning budget deficits. Public employee costs account for a large share of...

Just days after becoming controller of financially strapped Harrisburg, Pa., in January, Daniel Miller began uttering an obscure term that baffled most people who had never heard it and chilled those who had: Chapter 9. The seldom-used part of U.S. bankruptcy law gives municipalities protection from creditors while developing a plan to pay off debts. Created in the wake of the Great Depression, Chapter 9 is widely considered a last resort and filings under it are more taboo than other parts of bankruptcy code because of the resulting uncertainty for everyone from municipal employees to bondholders.