Article ID: | iaor2006702 |
Country: | United States |
Volume: | 17 |
Issue: | 2 |
Start Page Number: | 129 |
End Page Number: | 150 |
Publication Date: | Jan 2005 |
Journal: | Journal of Public Budgeting, Accounting and Financial Management |
Authors: | Hassett Wendy L., Watson Douglas J., Handley Donna Milam |
Keywords: | management, economics, government |
Since 1934, the federal government has provided a process for municipalities to declare bankruptcy, and approximately 500 governments have done so. In recent years, an average of less than one city government declares bankruptcy each year. In this article, the authors identify five factors that contribute to financial distress for cities which, if left unattended, can lead to municipal bankruptcy. This discussion is followed by an examination of the events that led to the bankruptcy of the City of Prichard, Alabama, once a prosperous suburb of Mobile. The authors conclude that this municipal bankruptcy occurred, in large part, because Prichard failed to face the factors of financial distress identified by the authors in the years prior to filing for bankruptcy.