Historically, it's rare for cities and municipalities to default on loans, and even rarer for them to declare bankruptcy. However, since the Great Recession, bankruptcy or talks of it have become more commonplace in U.S. cities.
Click through to find out which cities in the U.S. squandered away money, and which ones had full-on financial meltdowns.
The Great Recession was hard on almost every city in the U.S. Oakland didn't declare bankruptcy, but in 2009, the city faced a $100 million budget deficit. At that time, the Oakland City Council began discussing bankruptcy, according to SFGate.
A huge public service payroll helped drain Oakland's finances. It included $212 million for police, $103 million for fire protection service and $41 million in debt service payments. After those expenses, Oakland was left with roughly $60 million to cover all other costs.
Oakland has continued to struggle amid the nation's recovery from recession. Between 2008 and 2013, Oakland eliminated 720 jobs, equal to 16 percent of the city's labor force, according to USA Today. Add on that Oakland already has a high cost of living and low wages, and the city is among the worst places to save money in the U.S.
Meanwhile, Oakland schools are now facing a major financial shortfall due to overspending, which has upset many because the Oakland Unified School District had already received a large state bailout in 2003 to cover a $37 million deficit.
Atlantic City, N.J.
Atlantic City has never outright declared bankruptcy. The East Coast gambling haven, however, has had more than its fair share of financial troubles — not to mention it was hit by one of the costliest hurricanes in history in 2012.
Recently, pressure has ratcheted up on the city to turn its financial situation around. After years of unsuccessful revitalization, Atlantic City put forward a five-year plan to get its finances on track. The New Jersey state government, however, rejected the plan and in November 2016, the New Jersey Local Finance Board voted to take control of the city's day-to-day government functions, according to the New York Daily News.
According to Bloomberg, one of the main reasons for Atlantic City's recent money problems is the fact that one-third of its casinos closed down in 2014. As casinos shut down, the city's tax base has diminished because the value of taxable property has dropped. Atlantic City owes millions in bond payments, but the state of New Jersey has not let the city default or go bankrupt since the Great Depression.
Cleveland had it rough during the Great Recession, but its closest call with bankruptcy happened many years ago.
According to U.S. News, the city's first brush with the financial brink occurred in 1978, when Cleveland owed a total of about $15.5 million to several banks. When no agreement could be reached with the banks by Dec. 15, 1978, Cleveland defaulted on its loans, destroying the city's credit rating.
Cleveland's default ended almost two years later — not by paying off the loans, but by extending them. Although the city recovered from that low point in 1978, Cleveland at the time had become the first major American city to default on its debts since the Great Depression.
To this day, the city can be a tough place to make money, and is ranked one of the worst cities to own investment property.
Big public employee budgets are a common theme among bankrupt or financially struggling cities. In the case of Providence, its public safety budget, and employment and retirement benefits payouts have created a deficit that could grow to $37 million in the next decade, according to WPRI, a Rhode Island news station.
The city enlisted the aid of Public Financial Management Inc. (PFM) to evaluate the city's finances. The PFM report revealed that employee and retiree benefits have been rising, increasing the pressure on Providence's budget. On top of that, the Rhode Island state government has seriously slashed financial aid to the capital, with Providence receiving nearly $30 million less in 2016 than it did in the 2007 fiscal year.
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Growing pension payments, pension-related debt and the cost of healthcare for retirees are major problems contributing to Richmond's financial distress. But, perhaps the most visible problem in Richmond is the weight of public employee salaries. The city's 938 employees earn an average salary of $92,000, the fifth-highest in California as of 2015, according to the state controller.
Despite a slew of planned cutbacks, Richmond is still in dire financial straits, with some officials believing the city won't be able to escape filing for bankruptcy. The city's financial consultants estimated that the municipality needs at least $15 million more in new revenue by 2021, which will probably come from additional budget cuts and selling property owned by the city.
Desert Hot Springs, Calif.
Several cities in California have been forced to declare bankruptcy over the years. Desert Hot Springs filed for bankruptcy protection on Dec. 21, 2001, in order to adjust its estimated $8 million debt, according to the Los Angeles Times.
The city's $8 million debt came about due to legal action back in 1990. Desert Hot Springs lost a lawsuit filed by development company Silver Sage Partners Ltd., when the Desert Hot Springs City Council rejected the developer's plans to build a mobile home park. Silver Sage took the city to court — alleging discrimination against low-income families — and was awarded $3 million, and then an additional $3 million in interest and legal fees in 2001.
In 2001, then-Mayor Matt Weyuker argued that bankruptcy was the best way to protect the city and its residents. The city exited bankruptcy in 2004, but Desert Hot Springs has been unable to fully recover from the 2001 court ruling and bankruptcy. The debt burden continued up until 2013 and 2014, when the city again faced a fiscal emergency.
Currently, Desert Hot Springs has been more stable financially, with the city projecting revenue to increase modestly from $15.06 million in 2017 to $15.2 million in 2018.
Mammoth Lakes, Calif.
A small California resort town, Mammoth Lakes filed for bankruptcy in 2012, but the origins of its woes dated back to 1997.
The city had brokered a deal with developer Terrance Ballas to build residential and commercial structures near the airport. Ballas transferred the residential development rights to another company, Mammoth Lakes Land Acquisition, which sued the city in 2006 for breach of contract because of the development area it had been apportioned.
San Bernardino, Calif.
San Bernardino filed for Chapter 9 municipal bankruptcy in 2012. It was the third Chapter 9 bankruptcy filed by a California city in one year. The declaration of bankruptcy was preceded by a city staff report that said San Bernardino faced an estimated $45 million deficit because of the city's exhausted reserve funds and future spending obligations.
A federal judge granted the city eligibility for bankruptcy protection, but San Bernardino has not had it easy since filing. From 2012 until May 2016, the city spent $18.8 million on bankruptcy-related expenses for attorneys and consultants.
For a while, Stockton held the record for being the largest city to file for bankruptcy. Stockton filed for Chapter 9 bankruptcy protection on June 28, 2012, owing substantial debt to several creditors. They included the California Public Employees' Retirement System, which managed the city's pension plan and had a massive $147.5 million claim against Stockton for unfunded pension costs.
These circumstances created a $26 million deficit in Stockton's budget that necessitated bankruptcy protection — the only option left, according to city officials.
The San Francisco Bay Area city of Vallejo officially filed for Chapter 9 bankruptcy on May 23, 2008, just a few weeks after the city council unanimously voted to take the action. The city faced a $16 million deficit, a depleted reserve account and an inability to reach agreement with police and firefighter unions over pay cuts.
Vallejo's fundamental budget issue was the fact the city spent nearly three-quarters of its $80 million general fund on public safety salaries for positions such as police and firefighters. That percentage was much higher than the state average.
Since filing for bankruptcy, Vallejo has recovered. In fact, house prices in this city jumped in 2016.
Contracts are difficult to back out of, as the town of Hillview discovered in 2005. Back in 2002, Hillview made a real estate deal with Truck America Training LLC, which planned to lease and then buy land from the city to develop a truck-driving school. After Truck America heavily invested in its plans for the school, Hillview tried to back out when another potential buyer emerged.
The truck company took Hillview to court over an $11.4 million claim, and the city lost. That lawsuit, along with other creditors, pushed Hillview to file for Chapter 9 bankruptcy protection on Aug. 20, 2015, facing approximately $50 million to $100 million in debt.
At the end of March 2016, Hillview reached a repayment deal in which it agreed to raise taxes and borrow $5 million to pay off a settlement.
Detroit filed for Chapter 9 bankruptcy protection on July 18, 2013, becoming the record-holder as the largest city to file.
On a broad level, Detroit suffered from a general decline of the city — its population has dropped 28 percent since 2000. Bankruptcies in the auto industry also hit the city, with General Motors and Chrysler both filing for Chapter 11 bankruptcy protection in 2009.
Although still struggling, Detroit has made significant efforts toward recovery. In November 2014, a federal judge approved Detroit's plan to pay off about $7 billion in debt. Despite a history of poor municipal management, Detroit's economic response was quite efficient, handled by state-appointed bankruptcy attorney Kevyn Orr. At the time of bankruptcy, Detroit amassed total liabilities worth an estimated $18 billion.
Despite its troubles, Detroit appears to be heading in the right direction. Although Michigan is overall rated poorly among the best and worst states to start a business, Detroit shows good conditions for potential startups.
The capital of Pennsylvania, Harrisburg got itself into financial trouble over a trash incinerator — technically, a trash-to-energy facility. The incinerator was supposed to cost $62.4 million and produce a $57.4 million surplus by 2028. Instead, costs eventually ballooned to more than $300 million, according to Bloomberg.
The City of Harrisburg filed a Chapter 9 voluntary petition for bankruptcy Oct. 11, 2011, according to the Pennsylvania Bar Association. But Harrisburg's municipal bankruptcy became more complicated in June 2011, when then-Pennsylvania Gov. Tom Corbett signed Act 26, a law that modified the state's financial code. The new legislation invalidated Harrisburg's attempts to seek Chapter 9 bankruptcy protection, leading to its dismissal by the U.S. Bankruptcy Court.
Instead of bankruptcy, Harrisburg went into receivership and sold the botched incinerator.
Central Falls, R.I.
Like many cities on this list, Central Falls faced serious financial headwinds due to the Great Recession. By 2011, the amount of unfunded pensions and retiree health benefits soared to $80 million, against an annual budget of only $17 million, according to Reuters.
Central Falls filed for Chapter 9 bankruptcy on Aug. 1, 2011, due to roughly $20.8 million in outstanding debt, according to Moody's. That endangered the town's general obligation bond rating. Central Falls got its bankruptcy plan approved in court and emerged from Chapter 9 bankruptcy, although it continued to struggle in its recovery.
Recently, Central Falls closed a financial deal with the state. Rhode Island appropriated $600,000 to Central Falls to assist with its financial woes. That was the same amount of money Central Falls was court-ordered to pay the state in order to get its bankruptcy plan approved in the first place. The good news is that S&P Global Ratings upgraded the city's municipal bonds, reflecting increased confidence in financial management by the government of the city.
Moffett is a tiny town on the Oklahoma-Arkansas border that incurred a huge deficit: $43,033 worth of assets against $199,396 in liabilities, according to NewsOk. The city sought Chapter 9 bankruptcy protection in January 2007, but the reasons for the bankruptcy filing are more complicated.
Moffett's longtime mayor, Billy Yandell, had run up a large bill on the town's tab without its knowledge or approval. When he died, Moffett discovered the debt. But what added to the town's debt crisis was something equally unusual.
In December 2006, the state Department of Public Safety declared Moffett as a speed-trap town and ordered police to stop issuing tickets on U.S. Route 64. On top of that, Oklahoma issued a state order prohibiting Moffett's police from enforcing traffic laws on U.S. 64. With the town's main source of revenue cut off, Moffett was forced to file for Chapter 9 bankruptcy protection.