When a court slapped a $3 million liability judgment against South Tucson, Ariz., the desert community of 6,000 offered a few court papers in return: It filed for municipal bankruptcy.
A policeman had been shot in the back while working for South Tucson and, according to Town Manager Bill Ponder, won a liability judgment that was about the same size as the town budget.
"Basically, it was the only way out," said Mr. Ponder. "But it's something you have to live down, and you've got to build up people's trust in you again."
Since the community filed for bankruptcy in 1983, South Tucson has erased most of its debt and streamlined its government to suchan extent that the community has been able to weather the recession.
"As Bridgeport, Conn. [which recently filed for bankruptcy], will find out, for years to come the stories about Bridgeport will begin: the 'bankrupt city of Bridgeport' or the 'financially troubled city of Bridgeport,' " Mr. Ponder said.
"You have to work extra hard to regain the public trust," he said. "And you have to work extra hard to convince business and industry, cautious by nature, that you offer a stable business environment. It's pretty awful. Even then, we have no regrets. For us, it was the only viable alternative. We simply ran out of money."