Bankruptcy Loses its Taboo for California's Cities

Bankruptcy is no longer taboo among California’s struggling cities. San Bernardino has just become the third Golden State municipality in two weeks to fail - ending a four-year hiatus since fellow California town Vallejo began its costly and protracted court battle against creditors. So far, though, investors seem pretty sanguine. Granted, the three cities, which also include Stockton and Mammoth Lakes, are hardly bustling metropolises - each has a population of less than 300,000. But California, home to the glamorous Silicon Valley and Los Angeles, has the high taxes, big government and heavy regulation that are characteristic of major metropolitan areas. That makes it especially tough for cities in the state’s heartland that can’t attract the glitterati. They have also been hammered by the housing market bust. Throw in rising pension costs and terrible governance and it’s likely that other towns will turn to the courts to remedy their woeful finances.

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