Aug 2 (Reuters) - For decades, bankruptcies have been rare
in the $3.7 trillion municipal bond market, but experts say
there now might be an uptick as counties, cities and towns work
to recover from the economic recession while coping with
stubbornly rising costs.
There have been nine Chapter 9 municipal bankruptcy filings
so far this year, compared with 13 in all of 2011, according to
James Spiotto, partner at Chapman and Cutler LLP.
Since 1980, there have been 271 muni bankruptcies, with most
involving utilities and special districts, the data showed.
Cities, villages and counties accounted for only 52 of the
The highest number of bankruptcy filings occurred in
Nebraska, followed by California and Texas.
Analysts, investors and traders are all watching to see what
happens with a few possibly trailblazing cases still playing
SAN BERNARDINO, CALIFORNIA
San Bernardino filed for bankruptcy status on Aug. 1,
becoming the third city in America's most populous state in
recent weeks to use Chapter 9 in a fiscal crisis.
The city of about 210,000 residents located 65 miles (104 km)
east of Los Angeles said it had more than $1 billion in debts,
had tapped out its financial reserves, and had projected
spending would top revenue by $45 million in the fiscal year
that started on July 1.
MAMMOTH LAKES, CALIFORNIA
Mammoth Lakes went to federal bankruptcy court on July 3,
seeking shelter from a $43 million legal judgment.
The resort town of about 8,000 in the Sierra Nevada Mountains
filed for Chapter 9 bankruptcy after losing a legal battle with
property developer Mammoth Lakes Land Acquisition. The company
has said it would contest the town's eligibility for protection.
Stockton, a city of 300,000 located east of San Francisco,
became the biggest U.S. city ever to file for bankruptcy in
June, after years of fiscal mismanagement and a housing market
crash left it unable to pay workers, pensioners and bondholders.
The filing followed months of confidential talks with
creditors aimed at averting bankruptcy.
JEFFERSON COUNTY, ALABAMA
At $4.23 billion, Jefferson County set the record last
November for the biggest municipal bankruptcy filing, which is
still working its way through the court.
The county, home to Birmingham, Alabama's largest city, is
saddled with massive sewer-system debt. A tentative workout,
mainly with Wall Street creditors, unwound and scuttled
concessions that might have been worth $1 billion to the county.
After the loss last year of a local jobs tax, the county has
cut hundreds of staff, reduced services sharply and stopped
payments on general obligation debt. Earlier this month, the
county's computer systems failed, delaying payments of bills and
ORANGE COUNTY, CALIFORNIA
The county, California's third-most populous, filed for
bankruptcy in December 1994 after rising interest rates savaged
investment bets by its treasurer, leaving the county with a loss
of $1.7 billion in an investment pool. That put Orange County at
risk of a $1 billion default the next year.
Orange County emerged from bankruptcy after 18 months. It
lost its title of the biggest municipal bankruptcy in U.S.
history when Alabama's Jefferson County filed in November 2011.
Harrisburg, the state capital of Pennsylvania, so far has
lost in court when it has tried to file for bankruptcy. But it
might relaunch that strategy when a state law banning its
bankruptcy expires on Nov. 30.
With a population of 50,000, Harrisburg is plagued by $320
million of debt incurred by cost overruns from an upgrade of its
On Tuesday, Harrisburg's City Council sued the state to halt
work being done by a state receiver overseeing the city's fiscal
Vallejo, a former U.S. Navy town near San Francisco, filed
for bankruptcy on May 23, 2008, after failing to address steep
city personnel costs and sliding revenue from a housing slump.
In July 2011, the city won court approval for its financial
plan to exit bankruptcy protection.
CENTRAL FALLS, RHODE ISLAND
The smallest city in the smallest U.S. state filed for
bankruptcy on Aug. 1, 2011, after failing to win concessions
from public-sector retirees and others to address an $80 million
unfunded pension and retiree health benefit liability that was
nearly quadruple its annual budget of $17 million.
Central Falls' bankruptcy was filed by its state-appointed
receiver. The state has appointed budget commissions to oversee
the finances of two other Rhode Island towns, East Providence
(Reporting by Jim Christie, Verna Gates, Melinda Dickinson,
Hilary Russ and Karen Pierog)
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