DEPOE BAY, Ore. — Picture the spouts of gray whales arcing against a stormy Pacific sky, but the harbormaster’s office dark and padlocked, streetlights flickering out one by one. In this pint-sized coastal enclave of 1,600 souls, a cascade of mounting costs, a debilitating lawsuit and fragile revenues could spell not just belt-tightening, but the outright erasure of cityhood itself — a fate Oregon law dangles like a grim lifeline for cash-strapped municipalities.

The nuclear option? Dissolution, where the city charter dissolves like sea foam, folding streets, sewers and police into Lincoln County’s embrace.

Depoe Bay isn’t there yet. Its fiscal year 2025-26 budget, adopted in June, clocks in at a modest $5.6 million, buoyed by tourism taxes and state grants for harbor repairs. But like other small towns across the state, it orbits ever closer to a black hole of legal and fiscal calamity. Leaders whisper of storm clouds: inflation-gorged infrastructure costs, a post-pandemic tourism stutter, and the ever-growing tab for disaster prep. The new $5 million harbor is bleeding red ink, the sewer plant is overwhelmed by unrestrained growth and the city’s books, unbalanced for five years, are in such bad repair that an auditor recently determined they were unreliable.

“We can’t keep going like we’re going,” said a city councilor during a recent meeting.

Oregon’s small towns, from rural hamlets to seaside specks like Depoe Bay, operate in a fiscal straitjacket: Unlike most states, the Beaver State bars municipalities from Chapter 9 bankruptcy protections under federal law.

No court-supervised debt restructuring for them. Instead, when the coffers run dry, cities must hack away at services, hike fees, contrive unpopular new taxes or beg for state bailouts that rarely materialize in full.

The nuclear option? Dissolution, where the city charter dissolves like sea foam, folding streets, sewers and police into Lincoln County’s embrace. Envision the unraveling: It starts with missed payrolls for the skeleton crew of city employees — a public works director, a part-time planner, the harbor crew who wrangle finger docks in the churning inlet.

Bondholders sue for repayment, tying up what little transient lodging tax trickles in from the motels. Pension obligations for retirees, already a $2 million unfunded liability, balloon as investment returns sour. The City Council, meeting in the cramped chambers off Highway 101, declares a fiscal emergency by mid-2026. Public hearings erupt in fury: Boaters decry marina closures, businesses bemoan the unchecked homeless camps, families avoid the once safe parks.

Under Oregon Revised Statutes Chapter 221, dissolution requires a vote by the council and approval from the state’s Department of Revenue, followed by a referendum if enough residents petition.

Lincoln County, overseeing 40,000 square miles of rugged coast and timberland, steps in as the default custodian. City Hall on Shell Avenue? Renamed Claire Hall, and repurposed as a county satellite office. The two deputies patrolling for DUIs and driftwood thieves? Merged back into the sheriff’s roster, with response times stretching from minutes to hours. Utilities, like the docks and waterworks? Privatized or county-run, with water rates spiking 20% to plug leaky pipes, echoing the “rate shock” that gutted services in insolvent Molalla back in 2012.

Taxes and fees wouldn’t vanish, they’d redirect to county coffers for broader services like jails and distant roads. There would be no rush by county commissioners to make things better, either. Facing their own deficits, 21 of Oregon’s 36 counties, including Lincoln, are slashing programs this year amid a $1.2 billion statewide shortfall.

The psychic toll hits hardest. Depoe Bay’s quirky ordinances — bans on vacation rentals, roosters and cutting down trees — evaporate. Festivals like the annual Crab Feed? County-fied, diluted into generic fairs. The Indian-Style Salmon Bake? Given back to the Native Americans.

Tiny Lakeside in Coos County flirted with dissolution in 2018 over a $500,000 hole, opting instead for austerity that axed its library branch. Up north, Garibaldi’s harbor district teetered in 2023, salvaged by emergency levies but leaving fishermen griping over moorage hikes. Larger peers like Eugene and Salem stare down $20 million gaps, trimming parks and transit to stay solvent.

Depoe Bay has no property tax, relying on a general fund comprised mainly of visitor dollars so vulnerable a sneeze from Portland’s self-inflicted recession could cough-up the end. Mayor Kathy Short, wrapping up the council’s Oct. 7 session, waved off doomsday talk. “We’ve got resilience in our DNA.” she said.

As gales whip the bay this fall, Depoe Bay clings to its ledge. Insolvency wouldn’t drown the town outright, but it could wash away the lines on the map that make it matter. In Oregon’s fiscal wilds, survival means more than balancing books — it demands reinventing the wheel, one stubborn wave at a time.