“If you’re a community, you don’t want to go into bankruptcy,” said Chris Mier, the chief municipal strategist for Loop Capital Markets in Chicago, a bond underwriter. “It’s expensive. It’s lengthy. It’s a black eye.”
Some localities, including Providence, Rhode Island, have taken steps to shore up pensions by paring employee benefits. Last year, San Diego and San Jose, California, voters approved measures to bolster pensions and steer new workers into 401(k)- style savings plans, which don’t offer lifelong payments like those in Detroit. Baltimore, struggling to reverse years of population declines, is pressing for similar steps.
Higher Contributions
Costs for some cities will keep rising as they make up for years of failing to contribute enough to pensions. In April, the California Public Employees’ Retirement System said it may need to raise municipal pension contributions by 50 percent.
In Syracuse, New York, a $30.1 million pension bill in fiscal 2013 was twice what it paid five years earlier, according to city budget documents. Mayor Stephanie Miner told reporters last year that she hired outside legal help for advice on the municipal bankruptcy process, though she didn’t expect to need it.
In most cities, revenue is stabilizing as home prices rise, increasing real-estate receipts, said Donald Boyd, a senior fellow at the Nelson A. Rockefeller Institute of Government in Albany, New York.
“A lot of cities have more robust economic foundations that are more likely to rebound,” compared with Detroit, Boyd said. “To say bankruptcy is the new norm or the new widespread phenomena, it’s just too soon to say.”