Foreclosures, declining property taxes take economic toll

World Report | Chen Weihua

When the town of San Bernardino, California, was hit by declining property taxes caused by massive foreclosures and lower housing prices, the city closed most of its offices on Fridays, and over a 3-year period cut employees' salary by 10 percent and reduced its workforce by 20 percent.

On Wednesday, the City Council voted 5-2 to declare a fiscal emergency and file for Chapter 9 bankruptcy protection because the city was facing insolvency. San Bernardino's deficit is expected to hit $45 million in the coming year. With only $150,000 in the bank, it cannot even honor the Aug 15 payroll.