Earlier this week, Stockton, California became the largest US city to seek bankruptcy protection. The Bay Area city of 300,000 borrowed heavily during the 2000s in an attempt to attract increasingly mobile capital, conferences and high-income residents. Others
Diana Marcum tells the story at the LA Times:
How Stockton found itself so mired in debt can be seen everywhere in the city’s core. There is a sparkling marina, high-rise hotel and promenade financed by credit in the mid-2000s, mere blocks from where mothers won’t let their children play in the yard because of violence.
During the economic boom, this working-class city with pockets of entrenched poverty tried to reinvent itself as a draw to Bay Area refugees and a popular site for conventions. It offered generous city employee pension plans and benefits.
Marcum reports that the financial crisis hit the city hard:
…when the bust came, few places fell as hard as Stockton. The city has the second-highest rate of foreclosures in the country and the second-highest rate of violent crime in the state.
The city made $90 million in drastic cuts from the general fund in the last three years, including reducing the Police Department by 25%, the Fire Department by 30%, and cutting pay and benefits to all employees. There is a state investigation into whether Stockton’s financial devastation was entirely due to shortsighted optimism or if there was corruption. The state mediation law requires assigning blame.
But Alan Greenblatt at Governing Magazine says Stockton’s bankruptcy can’t be blamed on a “signature failure” like those in Jefferson County, Alabama. In those communities a wave of organized crime has devastated cities and generations of residents because of corruption and bid-rigging.
The degree of corruption is less clear in Stockton. The bankruptcy is sure to bring new scrutiny, though.
Some are already using the bankruptcy to further demonize and attack public sector workers, unions, students, and educators.
Instead, let’s keep our focus on collaborating banks and corrupt municipal officials.