Nine American Cities Going Broke

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9. Camden, NJ
> Credit rating: Ba2
> 2009 revenues: $181,257,000
> 2009 debt: $103,284,000
> Median household income: $25,418

Camden suffers from high unemployment, high poverty, and a weak tax base. The city’s median household income is less than half that of the national median income and is the lowest of all the municipalities on this list. Moody’s notes that “more than half of Camden’s real estate is tax-exempt, hampering already weak tax collections.” The city has had a speculative grade credit rating since 1998. Three out of the past five Camden mayors have been sent to prison for corruption, the most recent in 2001.

8. Strafford County, NH
> Credit rating: Ba2
> 2009 revenues: $36,204,000
> 2009 debt: $23,866,000
> Median household income: $58,363

Strafford County’s low rating is largely due to a money-losing nursing home, on which the county spends two-fifths of its budget. Just under 85% of the patients at the Riverside Rest Home are eligible for Medicaid, yet state reimbursements to the county continue to decrease, according to Moody’s. Between 2004 and 2009, the nursing home lost $36 million. The county does not expect to recover much of the money it used to cover these deficits.

7. Riverdale, IL
> Credit rating: Ba2
> 2009 revenues: $8,358,000
> 2009 debt: $9,350,000
> Median household income: $40,659

Riverdale has run operational deficits for a number of consecutive years, driven primarily by
a reduction in the amount the village relies on debt financing. “The village funded itself by borrowing money from its sewer and water funds, and now carries an operating fund balance of -52.1% of revenues.” The city, like many others on this list, is extremely small, with a population of just over 14,000.

6. Salem, NJ
> Credit rating: Ba3
> 2009 revenues: $7,059,000
> 2009 debt: $10,098,000
> Median household income: $28,397

Salem guaranteed bonds issued to finance an office building downtown. The city planned to pay for the bonds with revenues earned from leasing office space in the building. However, revenue fell short of what was projected when construction delays caused lease payments delays. “The project’s debt service reserve fund has been drawn down numerous times,” Moody’s reports. “Once the reserve fund has been exhausted, the city is obligated to pay debt service for the life of the bonds.”

5. Detroit, MI
> Credit rating: Ba3
> 2009 revenues: $1,280,791,000
> 2009 debt: $2,449,480,000
> Median household income: $29,447

Detroit has suffered worse from the recession than almost any other U.S. city. The effects of the city’s economic situation are reflected in its credit rating. Many of Detroit’s biggest companies, such as General Motors and Chrysler, declared bankruptcy, placing “significant pressure” on the city, according to Moody’s. Detroit relies on the auto industry for its tax base, and the industry’s contraction has hurt the city immensely. The city became a “habitual note borrower,” relying on investors to close budget gaps.