Vallejo, California, wasn't heaven, maybe. But at least it wasn't hell. Then, in 2008, bankruptcy hit this city on the northern rim of San Francisco Bay hard. Budget cuts shuttered fire houses and thinned the ranks of police. Abandoned and foreclosed homes pockmarked neighborhoods. As businesses left Vallejo and taxpayers fled, prostitutes and drug-sellers moved in.
Vallejo knows what it's like to go through desperate times—a distinction it shares with similarly-blighted towns and counties around the U.S., including Central Falls, R.I.; Harrisburg, Pa; Boise County, Idaho, and Jefferson County, Ala.
All these municipalities are either facing bankruptcy, have already declared it, or, like Vallejo, are now emerging from it painfully, scarred and withered versions of their former selves.
Few cities get so desperate as to seek bankruptcy protection. Since 1937, when Chapter 9 filings first became an option for municipalities, there have been only 625 filings, says Chicago attorney James Spiotto, who has written books on the subject. Only five communities this year have filed for bankruptcy. Six filed in 2010.
For some towns, bad times arrived slowly, by a variety of roads. For others, a single event tipped them into darkness.
The closing, in the 1990s, of a U.S. Navy base pulled the financial rug out from under Vallejo. Boise was the victim of bad legal luck: A jury ruled in 2010 that the county had wrongly prohibited a developer from building a teen treatment center. The developer won a $4 million judgment, which Boise has been hard-pressed to pay.
Harrisburg fell victim to the "incinerator from hell"—a waste-to-energy incinerator whose renovation caused the town to go $310 million into debt, five times as much money as the city has in its general fund, according to the Stateline newspaper. Pennsylvania in December declared the city—its capitol—financially distressed.
Jefferson County in Alabama, home to Birmingham, has been suffering for three years from the collapse of a sewer bond refinancing. As of mid-August, it stood poised to file the largest municipal bankruptcy in U.S. history, according to Bloomberg News. It has since delayed filing, to continue negotiating with its creditors.
So strapped is the county that it can't afford to make repairs to its aging bridges. For safety, school busses must go around them, racking up 1,722 miles in detours at an added cost of $2.5 million a year, reports Bloomberg.
Central Falls' economy declined over many years, starting in the 1970s, when local textile makers began moving plants overseas. Some 1,400 jobs ultimately were lost, according to the National Council of Textile Organizations. Crime increased to the point that Central Falls in 1986 was crowned the Cocaine Capital of new England by Rolling Stone magazine.
According to court papers, Central Falls ran out of money to pay its bills August 31. It has a structural budget deficit of $5.6 million and an unfunded liability of about $80 million for retirement benefits and pensions. The New York Times describes the tiny town—just over 1 square mile in size--as impoverished.
To stave off bankruptcy, Central Falls now is trying to wrest back from its police and firemen some $2.5 million in promised pension benefits. It has eliminating funding its library, laid off staff, and has closed a community center.
All this pales, however, before what Vallejo has been through.