In today’s modern society a new occurrence is becoming more common in Americas cities. This occurrence is municipalities that are going bankrupt occasionally because of mismanagement, but more often it is due to a slacking economy in which we find ourselves today. For the last several years the American economy has suffered greatly in many important industries that at one time lead the way in the American gross national production.
Industries such as construction, the auto manufacturers, integrated circuits, food production, and thousands of other industries that dot the American industrial landscape have suffered financially and economically due to what our politicians call a recession. Many economists that have been monitoring the fiscal might of the United States have publically admitted that we are actually in a depression and not a recession. It is true, they say that it is not at the magnitude that the great depression was in the nineteen thirties, but it is still a depression never the less.
Because of these circumstances that currently exist in the United States they have placed a great fiscal and financial burden on the municipalities of the country. These American cities find themselves on the verge of default because of this unspoken depression that the U.S. is going through. They find that many businesses that had, had their manufacturing plants or retail stores in their cities for decades are now moving to other municipalities because of the financial illness that their host cities are suffering from. These financial maladies that are affecting America’s cities for the most part are not due to municipal mismanagement, but to the depressed economy that practically brought the American economy to a standstill. The slacking economy has not only affected the cities of the United States, but has also affected the cities of the entire world. Cities in other countries are also suffering from fiscal problems due to the American economy; we are now truly in a global economy where all the world’s economies are connected to one another.
If an American city finds themselves in this financial predicament they have several options that they can utilize prior to actually filing for chapter nine bankruptcy protection. Some of the options include contacting their debtor and trying to arrange some kind payment deferment plan. Another option that a municipality can do but is very unpopular with the citizens of any city is to raise taxes. This option should probably be done only if there is nothing else left to try, if taxes are raised and the services that the municipality is suppose to take care of actually become worse than you will have city residents leaving for greener pastures. This will actually make things even worse for the municipalities because now they have alienated their tax base, and will become even more in debt.
Municipalities do have some advantages over individuals if they were to file for bankruptcy protection. A city cannot have its possessions repossessed by their creditors. This in itself is a huge help to the municipality that is wishing to get back on their fiscal feet.
Municipalities can also sell off some of their assets in order to raise money to pay off their creditors. With some luck this can buy them some breathing space while they try to implement other strategies for fund raising. Before a city can apply for bankruptcy they must get approval from the state government and need to try all other options before bankruptcy is approved.
The labor markets in these cities will be greatly affected due to the lack of employment opportunities there. Sometimes the existing employers move to other cities that may be courting them with offers of tax breaks and incentives if they were to move their facilities to their city. These corporate offers can be very enticing to the corporations and many of them do take the offers. Sometimes these offers are made by foreign governments to these American businesses who very often move their facilities to other countries as companies such as Motorola, Intel, Ford ,General Motors, Chrysler, and hundreds of other American businesses have done.
This American business exodus only adds to the economic woes of the United States by transferring jobs that were once taken by Americans and moving them overseas to be performed by individuals in the hosting countries.