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 California Cities and Municipalities In Or Near Bankruptcy

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The Great Seal of CaliforniaJuly 18, 2012:   This is a list of California cities in Bankruptcy plus a list of cities that have announced they are near bankruptcy so far this year.  I will update this list with a new article as more cities file for bankruptcy protection.

What does it mean for a city to be bankrupt?

Cities can file for bankruptcy if they are insolvent which means they are unable to pay debts that are due. When in bankruptcy, a city doesn't have to pay its creditors while it negotiates a plan for dealing with its debts. Municipal bankruptcies are extremely rare because cities have the power to tax.  Since they can tax their citizens, cities have a hard time convincing a bankruptcy court that they truly cannot pay their debts.

List of California cities that have filed for Bankruptcy in 2012 :
  • June 18, 2012: Stockton, with 300,000 residents in the Central Valley just below Sacramento
    • "Stockton becomes the nation's most populous city to file for Chapter 9 bankruptcy."
    • "Stockton has about $700 million in bond debt."
    • The California Public Employees' Retirement System (CALPers) holds the most debt with $147.5M claim for unfunded pension costs.
    • "Other top creditors include investors holding $124.3 million of Stockton's pension obligation bonds, $40.4 million of the city's variable rate demand obligations, $35.1 million of the city's public facilities fees bonds and $31.6 million of the city's parking garage debt."
  • July 2, 2012: Mammoth Lakes 7,700 permanent residents near Yosemite in the Sierra mountains
    • "Mammoth Lakes said Monday that it filed for bankruptcy because it cannot afford to pay a $43-million breach-of-contract judgment in a lawsuit brought against it by a developer."
    • "Facing a judgment nearly three times the size of its annual operating budget and a $2.8-million shortfall in its 2011-12 fiscal year, the town had already cut many services and asked employees to take reductions in pay."
  • July 10, 2012: San Bernardino with 209,000 residents in the Inland Empire east of Los Angeles.
    • "The report said the city had exhausted its reserves and projected spending would exceed revenue by $45 million in the current fiscal year which started on July 1."
    • "San Bernardino "is still facing the possibility of insolvency due to a variety of issues including accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs," according to a budget analysis prepared for the council."
2012 List of  California cities who've announced they are near bankruptcy:
  • Compton, in Los Angeles County.  Announced July 18, 2012
    • "Treasurer Douglas Sanders told the council Tuesday night (July 17, 2012) that the city has $3 million in the bank and $5 million in bills to pay."

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