3. Pontiac, Mich.
> Credit Rating: Caa1
> 2011 general fund revenue: $36.2 million
> 2011 general fund debt: $86.7 million
> Median income: $30,753
Pontiac is the only city on this list to have a speculative rating predating the recession — since March 2006. Pontiac’s financial troubles, mostly the result of its reliance on the declining automotive industry, have been evident for years. As of June 2012, the city’s unemployment rate was a whopping 22.2%, or about 2.5 times the national rate. The city’s tax revenue continued to dwindle as its population diminished — the population of 59,515 as of the 2010 U.S. Census was 10.3% lower than in 2000. During 2012 alone, the city outsourced its police force to Oakland County and its fire department to Waterford township. Despite these moves, Moody’s projects that the city will close out fiscal 2012 with a deficit of $8.4 million due to retiree healthcare obligations and debt service expenditures. And if Pontiac doesn’t make reforms in regards to health care and debt service expenses, the deficit could rise to $14 million by the end of fiscal 2013.
2. Jefferson County, Ala.
> Credit Rating: Caa3
> 2011 general fund revenue: $311.1 million
> 2011 general fund debt: $1,141.3 million
> Median income: $45,244
In November 2011, Jefferson County, Alabama, filed for the largest municipal bankruptcy in U.S. history in terms of amount owed after county leaders and investors couldn’t reach agreements to refinance $3.1 billion in sewer bonds. The bonds have been in default since 2008. The county has continued to pay school and special tax bonds while in bankruptcy, although its sewer bonds remained in default. Moody’s placed a negative outlook for the bonds because “losses to bondholders once bankruptcy proceedings conclude could exceed the levels implied by the current ratings.”
1. Stockton, Calif.
> Credit Rating: Caa3
> 2011 general fund revenue: $180.3 million
> 2011 general fund debt: $248.5 million
> Median income: $47,946
Stockton, with a population of nearly 292,000 people in 2010, became the most populous city to file for bankruptcy in June after the city was unable to close a $26 million deficit. According to Moody’s, the Caa3 rating given to Stockton’s debt assumes that bondholder losses will be greater than 20%. A weak economy has hit Stockton particularly hard. The unemployment rate was 15.4% in April, cutting the revenues coming into city coffers. Stockton’s current year budget, which began in July, called for suspending $10.2 million in debt payments and $11.2 million in employee compensation and retirement benefits.
By Michael B. Sauter, Alexander E.M. Hess, Samuel Weigley