3 Huge Cities Next In Line For Bankruptcy

None of these US hubs is too big to fail, and that should scare investors

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3 Huge Cities Next In Line For Bankruptcy

Detroit’s looming bankruptcy is making news again, this time focusing on current restructuring plans aimed to wipe out $18 billion in debt by axing pension checks of city retirees, including police and fire.

Massive long-term retirement and healthcare promises were by no means solely responsible for the city’s fall, but these massive pensions coupled with a tax base weakened by high unemployment and housing vacancies caused the budget to bleed out quicker.

The Michigan city may be the most recent victim of bankruptcy, but many of the 61 largest U.S. cities have adopted the same retirement legacy leading to $118 billion in unfunded healthcare debts. Retired city workers stop contributing to the system; the system keeps paying them; and before you know, a fiscal crisis has begun.

If you think the three cities below are too big to fail, think again.

The solid performance in the stock market in 2013 may have allowed some of their investments within pensions to grow and cover costs.

However, when the growth rate of investments slow, and the payout rate speeds up, expect to see any one of these cities next in line at bankruptcy court:

 
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Article printed from InvestorPlace Media, http://investorplace.com/2014/03/cities-bankruptcy-chicago-new-york-los-anegeles/.

©2014 InvestorPlace Media, LLC

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