American cities are dropping like flies

Wed, 28 Nov 2012 18:30:00 +0000

Cities are dropping like flies. In the last several months, a string of municipal governments in states from Alabama to Rhode Island have filed for bankruptcy. Even more are likely to follow within the next year as cities reel from an end to federal stimulus dollars.

What’s going on with local governments? Their troubles stem from multiple sources, but the critical factor is, yes, after all this time, still the housing bust. City finances are almost exclusively tied to property tax revenue—indeed, most locales have no other funding source. Despite all the focus on mismanagement and bloated pensions, few cities would be in these severe dire straits had housing prices not fallen by roughly 41 percent or even greater, in some places.

Salon.com > Shanna Pearson

American cities are dropping like flies