3 Huge Cities Next In Line For Bankruptcy


Time Bomb iStock_000015833091XSmallDetroit’s looming bankruptcy is making news again, this time focusing on current restructuring plans aimed to wipe out $18 billion in debt by axing pension checks of city retirees, including police and fire.

Massive long-term retirement and healthcare promises were by no means solely responsible for the city’s fall, but these massive pensions coupled with a tax base weakened by high unemployment and housing vacancies caused the budget to bleed out quicker.

The Michigan city may be the most recent victim of bankruptcy, but many of the 61 largest U.S. cities have adopted the same retirement legacy leading to $118 billion in unfunded healthcare debts. Retired city workers stop contributing to the system; the system keeps paying them; and before you know, a fiscal crisis has begun.

If you think the three cities below are too big to fail, think again.

The solid performance in the stock market in 2013 may have allowed some of their investments within pensions to grow and cover costs. However, when the growth rate of investments slow, and the payout rate speeds up, expect to see any one of these cities next in line at bankruptcy court:

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  1. j says:

    Dear Author,
    If you think about it hard enough, there are many more contributing factors. How about the issue of inflated salaries for those within 5 yrs of retirement? Those inflated salaries make inflated pensions leading to a whooping pool of pension money that any given municipality will eventually not be able to pay out. You’d also have to point out the ridiculous levels of graft and corruption that have gone unchecked for decades leading to a real house of cards. It is simply a matter RATES and which one is climbing the graph faster. Then take the true victims who are ALL of the deserving men and women who worked ALL of their lives with honesty and integrity, fully EXPECTING that pension money to support them in their golden years. A system without checks and balances or any watchdog group is surely doomed.

  2. Alan Ray says:

    I am amazed how quickly increasing property taxes was mentioned to fix worker pension plans. Yet nothing is mentioned about reducing those workers payments now to help the long term situation. Its unbelievable that nothing seems to be happening by the responsible persons except waiting until the hammer drops and those former workers are in a soup line. All amounts to criminal negligence, and the responsible officials keep on spending like there are no limits. “Stupid is not a crime, but its not a excuse either.” Many players in this activity range from Congress on down (including the wall street banditos). Someone has got to say stop! I heard last week that 98% of kids in one local school get free lunches (I don’t believe this is possible/maybe 9.8%!), a lady lied and with a false PhD got a state teaching job, congress can buy & sell stocks with insider information without a legal problem, the social security office seems to decline all first request for disability because there are so many asking for free taxpayer money. Yep, and responsible officials mismanage city and state budgets and you end up with this kind of inexcusable situation. Maybe there should be automatic jail time and all assets seized from managers, CEOs, CFOs, Board of Directors, Mayors, (banditos), responsible for any retirement fund, city or state bankruptcy if the budget balance goes into the negative and can not pay its obligations.

  3. Bonnie says:

    These cities have been cow-toeing to union demands and the politician have been buying votes with promises of incredible retirement and health program but with no way to actually fund them for decades. It is a shame that millions of retired employees are counting on these wonderful benefits; however, the funding just isn’t there and the benefits will have to be slashed by 50% or more.
    It isn’t the responsibility of the states to bail out the cities because the states are the next in line to fall due to the same foolish promises and refusal to operate within the constraints of their income.


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