(CBS News) The recent turnaround in the housing market may be too late for cities struggling to cope with tax revenues.
There's no better place to look at this than Stockton, Calif., where the city council will discuss filing for bankruptcy on Tuesday night.
Business owner Bradley Koster is selling off what's left of his bar in downtown Stockton. He just went out of business.
"It hurts. I had loyal people that worked for me for years so it hurts," Koster said.
It wasn't long ago that business was booming in Stockton. Housing values nearly quadrupled and tax revenues poured in. The city spent $190 million to redo its marina, buy a new city hall, put up parking garages and an entertainment complex.
"On Friday and Saturday nights with hockey, every table every seat was taken," Koster said.
But the Stockton bubble was burst by the great recession.
Stockton has nearly 20 percent unemployment and one of the highest foreclosure rates in the country. The city tried to balance its books by cutting its police force 25 percent, the fire department 30 percent and other city workers 43 percent since 2008. Wells Fargo just repossessed those parking lots and the future city hall.
"It is at crisis stage," said Bob Deis, Stockton's city manager.
Deis is trying to figure out how to pay pensions and benefits for city workers -- benefits that include free health care for life and will cost Stockton $400 million it doesn't have.
"Given the economics today and what we expect I would say it borders on crazy," Deis said.
Talks with the unions have broken down. The city is $26 million in the red, and needs a balanced budget by Friday. Bankruptcy would allow Stockton to change its benefit agreements with workers. That worries Geri Ridge, a retired police dispatcher.
"All I'm asking is to get back what I deserved. I worked hard. So did all the other retirees they worked hard for this city," Ridge said.
Bradley Koster doesn't know what's next for him or the 290,000 other people who live in this city on the brink.
"Gotham City without the Batman," is how Koster described his city.
The city could file for bankruptcy as soon as Wednesday.