
Can Towns or Cities in Washington State Go Bankrupt?
Can Towns or Cities in Washington State Go Bankrupt?
I was reading a recent article in the Seattle Times about Cle Elum's possible bankruptcy, and it got me thinking: Can towns and cities in Washington State go bankrupt?
I was surprised, as it hadn't occurred to me. Not to say it's impossible, but you usually don't think towns and cities go bankrupt, but even little Mabton near Prosser has had some financial problems.

So how does it work?
Municipal bankruptcy occurs when a city or town is unable to meet its financial obligations.
Under Chapter 9 of the U.S. Bankruptcy Code, cities can file for bankruptcy to restructure their debts and continue operating critical services.
The backbone of any town or city is its local economy. When factories close, tourism slows, or major employers leave town, the resulting job losses can shrink the tax base.
With fewer people paying property or income taxes, the city may struggle to fund public infrastructure and services.
Take Detroit, for example. Once the heart of America’s automotive industry, Detroit declared bankruptcy in 2013. Years of industry decline and population loss had left the city more than $18 billion in debt.
Believe it or not, mismanagement like Mabton has brought many towns to the brink of bankruptcy. Failing to budget carefully, borrowing excessively, or relying on overly optimistic forecasts can lead to insurmountable financial burdens.
Public employees—from teachers to firefighters—depend on pensions when they retire. But in some cases, cities promise more than they can realistically afford.
Mother Nature often has the final say when it comes to municipal finances. Wildfires, hurricanes, and earthquakes can devastate local communities like we've seen with the recent Pacific Palisades fires in California, leaving them financially unable to rebuild without federal aid.
So during this time of upheaval in California, it's perfectly possible that a town or city can declare bankruptcy even in Washington State.
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