Comstock/Thinkstock(VALLEJO, Calif.) -- The city of Vallejo, Calif., 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.
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, while 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 capital -- 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.
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 on Aug. 31. It has a structural budget deficit of $5.6 million and an unfunded liability of about $80 million for retirement benefits and pensions.
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 eliminated funding for its library, laid off staff, and has closed a community center.
All this pales, however, in comparison to what Vallejo has been through. Since filing for bankruptcy in 2008, the town has become overrun by crime and prostitution in the wake of budget cuts that have reduced the city's police force by almost half. Prostitutes and pimps can be seeing plying their trade in the middle of residential areas.
In response, residents have taken matters into their own hands, instituting a neighborhood watch program, The Kentucky Street Watch Owls -- or, unofficially, the "Ho Patrol."
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