- and Tacoma should care!
According to the Associated Press, “A federal judge ruled Tuesday that Detroit can use bankruptcy to cut employee pensions and relieve itself of other crushing debts, handing a defeat to the city’s unions and retirees and shifting the case into a delicate new phase.” The ruling means that the city can now take on their $18 billion dollars of debt at a much reduced rate. Before the ruling, nearly half of every dollar the city of Detroit collected was used to pay down debt. Now, only a few pennies will go toward debt, while the rest can hopefully go toward a possible deal, paying back pensions owed to city employees. Obviously, this is a much better option for the once strong city, but few in Pierce County may see how it related to them.
There may be very few similarities between the collapse of Detroit and the financial struggles of Tacoma, but the ruling by a Federal Judge this past week does lay some groundwork for cities across the county. In 2011, the S&P downgraded the city of Tacoma from a AAA rating to a AA+ rating, which eventually dropped to a AA3 negative rating. While most cities in Pierce County remained the same, Tacoma dropped for a number of reasons that appear to have been resolved. Earlier this year, S&P and Moody’s updated Tacoma from a low, negative rating to a stronger A1 rating with a stable outlook for the future.
After the upgrade, Tacoma Mayor Marilyn Strickland was pleased. During an interview with the Business Examiner in January of 2013, she said “These ratings are encouraging. They reflect that the City of Tacoma has made some tough decisions and is now on a more sustainable financial path.”
Tacoma will probably never have the financial problems that have plagued Detroit, but with the new ruling, it will be interesting to see how cities address their debt in the future. Cities can go bankrupt, much like businesses and individuals. Tacoma appears to be on the upswing, but having a city downgraded shows that growth in this economy is still difficult.
If you are facing problems with debt and thinking about filing for bankruptcy for your business or family, we here at Shillito and Giske can help. Financial difficulties are everywhere, from major cities to our friends and neighbors. Give us a call today and get the respect and help that you deserve.