1. Central Falls, RI
2. Pontiac, MI
3. Jefferson County, AL
4. Harrison, NJ
5. Detroit, MI
6. Salem, NJ
7. Riverdale, IL
8. Stratford County, NH
9. Camden, NJ
These are the nine that have a Moody's rating of Ba2 or lower -- I didn't know there was lower -- but what's interesting is -- aside from the terrific showing from the Garden State! Way to go, New Jersey! -- is the reasons why some of these towns are in such trouble. It's pretty much what you'd guess, but the details are illustrative. From 24/7 Wall Street:
Each of these municipalities faces a unique situation, Moody’s explains, and the list is not indicative of a greater trend. Most municipalities, Moody’s writes in the report “face deeper and longer-standing problems than investment-grade issuers.” Analysis by 24/7 Wall St., however, reveals a number of commonalities between the lowest-rated areas.
For instance, a number of the municipalities on the list are facing shrinking tax bases possibly exacerbated by the recession and high unemployment. Some cities, such as Detroit and Pontiac, have had their economies devastated by the recession. Their populations have decreased dramatically and struggling major tax-paying corporations have contributed much.
Other cities have excessive liabilities that they are unable to meet. Central Falls, RI, declared bankruptcy in August due largely to its bloated pension plan. Strafford County, NH, spends two-fifths of its budget on a single nursing home. It funds residents’ Medicaid, but is not receiving full reimbursement from the state, causing multi-million dollar deficits.
Other municipalities have simply made bad investments. Harrison, NJ, built a $200 million sports arena that has not brought in the amount of money the city was expecting. Similarly, Salem, NJ, built a large office building downtown with the intention of leasing office space. But construction delays caused lease payment delays and money has been taken from the debt fund numerous times.
Shrinking tax base, changes in the economy, okay, I get that. But running a nursing home? Funding Medicaid? Investing in commercial real estate?
This is what happens when people in government leverage the taxpayer in order to build monuments to themselves, or in order to make absurd and unaffordable promises to their citizens. It's not the economy, stupid. It's the arrogance.