Can’t say we didn’t warn you. Municipal bankruptcies are back in the news today in a big way, with the FT reporting that Jefferson County, Alabama has filed for the largest such bankruptcy in history after a deal with its creditors fell apart overnight.The story is filled with the usual cast of characters: failed infrastructure spending, public sector malfeasance, and private sector wrong-doing. But events in Jefferson might herald the beginning of a new problem. As the article notes, despite renewed confidence in the municipal bond market this year, this latest bankruptcy filing will push up borrowing costs for other municipalities in Alabama that need to tap the market. If this trend spreads, given the mountains of debt held by cities around the country, even local governments that didn’t have a solvency problem at first will find themselves in trouble.If the economy recovers, some shaky government units may right themselves at least for now, but the trend lines are not good.The Blue edifice is crumbling, and it hurts.