Though the state of California has seen many financial hardships over the last few years, its cities and municipalities seemed to be doing fine. Now, however, doubts are arising about the financial security of California’s cities, too. The city of Stockton, CA, with a population of around 300,000 recently filed for bankruptcy, making it the largest municipality in the United States to ever file. Six days later, Mammoth Lakes, California is filing for bankruptcy.
A New Trend in California?
Political and financial analysts are now concerned that municipals filing for bankruptcy may be a new trend in California. The big question today is: will filing for bankruptcy be a habit that catches on as quickly as California wildfires?
The town of Mammoth Lakes is a wealthy, resort town with assets of more than $100 million listed. However, Mammoth Lakes’ debts exceed $50 million, with $30 million of that debt held by Mammoth Lakes Land Acquisition. On June 30, Mammoth Lakes Land Acquisition was awarded a $43 million judgment, which accounts for the $30 million credit they gave Mammoth Lakes, in addition to $13 million in interest and legal fees.
Needless to say, the town of Mammoth Lakes is feeling the heat from its biggest creditor. For a town like Mammoth Lakes, filing for bankruptcy may be the smartest move at this time. The $43 million owed is a heavy debt for the town, which operates on an annual budget of $19 million.
However, sometimes filing for bankruptcy is the best thing a town (or an individual) can do for itself.