Stockton bankruptcy: 'All that's left is sadness' for city

[AngelinaCat]

June 27, 2012 | 6:11 am

With the city of Stockton moving to become the nation's largest city to seek protection under the U.S. Bankruptcy Code, Tuesday night's City Council meeting was quiet, with an evident sadness on faces in the packed chambers.

Many residents said they were there mostly to hear for themselves that the day so long expected had finally come.

For at least a moment, blame and anger seemed to be set aside.

"All that's left is sadness," said Gary Gillis, who said he lived his boyhood dream by becoming fire chief in his hometown. "Stockton has the most good, solid, down-to-earth people you'll ever meet. And now things are going to get even harder for many of them."

The working-class port city -- from where many of California's agricultural exports set sail -- lived largely on credit during economic boom times. The city borrowed millions of dollars for ambitious, eye-catching projects in the mid-2000s. Up went a sports arena, hotel and promenade. The city booked a Neil Diamond concert as a kickoff to better times. Houses in sprawling tracts sold quickly and with high mortgages.

When the bust came, few places fell as hard as Stockton. It has the second-highest rate of foreclosures in the nation. Property tax money dried up.

In a desperate effort at solvency, the city made $90 million in drastic cuts over the last three years, including reducing the Police Department by 25%, the Fire Department by 30%, and cutting pay and benefits to all employees.

As of July 1, the city will still face a $26-million shortfall.

The city has stopped making bond payments, and City Manager Bob Deis said he expected to file bankruptcy papers immediately.

Still, some, such as Rev. Dwight Williams of the New Bethel Baptist Church, tried to stay positive.

"It's in our DNA to take the bitterness of lemons and make sweet lemonade," Williams said. "We remain optimistic and we will continue to take care of one another, but I think most people around here would laugh if you said Stockton was going to be bankrupt."

http://latimesblogs.latimes.com/lanow/2012/06/stockton-bankruptcy-all-thats-left-is-sadness-for-city.html

[banca rotta]

I don't know why the sadness. Some of you and myself are pretty happy after bankruptcy.

Since the 2008 global meltdown only Iceland went bankrupt and they are in recovery while Western Europe is burning to the ground. The US is next, but for now the focus is on Europe.

[LadyInTheRed]

I don't know why the sadness. Some of you and myself are pretty happy after bankruptcy.

More evidence of people's misconceptions about bankruptcy. It sounds like the Mayor of Stockton is trying to educate people about what BK really means. She compared the City to a family struggling to try to make ends meet. She also said "It's not the end of the world. It's really the beginning of our recovery." This quote is from a radio report that can be heard at http://www.californiareport.org/archive/R201206291630/c The end of the report talks about the City of Vallejo, not far from Concord and the former biggest city to file BK. Vallejo is now out of BK and, according to the report, is back on stable footing.

[BankruptinNJ]

Stockton is notorious for having a high crime rate, being the "most miserable" city, and having the least literate work force in the nation for all cities over 250,000.

http://en.wikipedia.org/wiki/Stockton,_California

Also, today's Huffington Post has this:

August 23, 2012

Stockton Bankruptcy May Force 'Mass Exodus' Of Police During Crime Wave

Bankrupt Stockton, Calif., faces a "mass exodus" of police officers in the midst of a crime wave if it is forced by creditors to slash pension benefits for current and retired employees, its city manager said in a letter to Gov. Jerry Brown.

City manager Bob Deis warned in the letter, released this week, that Stockton may "slip into municipal chaos" if the California legislature fails to reform the state's public pension system. The city declared bankruptcy in June.

The pension cuts proposed by creditors may prompt "a mass exodus of experienced officers in one of the state's most violence-prone cities," Deis wrote.

Several years of deep budget deficits have shrunk the Stockton Police Department by 25 percent, and forced deep cuts in pay and benefits for remaining cops. Many veteran officers have departed for other agencies throughout the state. As police ranks thinned, crime soared.

The city, already among the most violent in the country, is on pace to shatter its homicide record this year. Assaults on police officers have doubled in 2012 from a year earlier, the police department said.

Deis called on the governor and state lawmakers to find a solution for cities in dire fiscal straits to compete with better-funded municipalities in recruiting and retaining police officers and other public employees.

Connie Cochran, a spokeswoman for Stockton, said she is unaware of any direct response from the governor's office to the city manager's plea for action.

Evan Westrup, a spokesman for Brown's office, told the Stockton Record this week that the governor takes pension reform seriously and would push the legislature to act quickly. "We continue to work with the Legislature to ensure serious, lasting reforms to the state's pension system are enacted as quickly as possible," Westrup said.

Without reform, the results could be dire for Stockton and other struggling California cities. San Bernardino and Mammoth Lakes also filed for bankruptcy this year. Last week, Moody's Investment Service, a top U.S. credit rating agency, warned that more municipalities in the state may soon be bankrupt.

"As more municipalities approach the economic or political limit to raising taxes or adjusting spending, we expect an increase in defaults and bankruptcies over the next few years," Moody's reported.

In Stockton, two major bond insurance firms are "taking dead aim" at city pension obligations to the California Public Employees' Retirement System, Deis said. The firms argue that Stockton should be forced to reduce its pension payments in order to free cash to pay their claims.

In a memo to the Stockton city manager, Police Chief Eric Jones said slashing pensions for existing and future retirees may drive the remaining veteran officers out of the department.

"This would be extremely dangerous given our rising violence rates, including assaults on officers," Jones wrote.

Stockton's leaders describe their fiscal woes as the result of poor financial decisions by prior administrations, which saddled the city with debt and heavy pension costs and unfunded health care liabilities, and the effects of the recession, which has left the city with nearly 20 percent unemployment and a battered housing market.

The city's poor financial decisions were aided by Wall Street, a leading economist in the region reported in July. In 2006, Lehman Brothers, which collapsed into bankruptcy in 2008, underwrote $125 million in pension obligation bonds, according to the analysis by Jeffrey Michael, a University of the Pacific economist. Revenues from the bond sale were channeled into stock market investments that soon nosedived.

"Wall Street clearly encouraged and was a partner to many of the city's risky bets," Michael wrote on his blog.

http://www.huffingtonpost.com/2012/08/23/stockton-bankruptcy-police-crime_n_1826100.html#s783093

[jacko]

Where in Western Europe is burning?

I don't know why the sadness. Some of you and myself are pretty happy after bankruptcy.

Since the 2008 global meltdown only Iceland went bankrupt and they are in recovery while Western Europe is burning to the ground. The US is next, but for now the focus is on Europe.

[GoingDown]

Not all cities are having these problems of facing bankruptcy.

I think some of it has to do with being a "right to work" state, but it seems that when the economic downturn hit in Arizona, we cut back our expenses to the point where we could afford them. Some of the cuts were draconian, but it saved us from going over the cliff. We also added a few sales taxes and that helped to save us, as well. For example, Phoenix added a sales tax to food, and it stopped hiring people and cut the number of employees through attrition. As people retired, they didn't hire any new employees, they just made the existing employees do more. They also did a lot of automation, reducing the need for more employees.

So, a combination of tax increases and cutting down on the number of employees can save cities from bankruptcy, but the unions have to get out of the way and let the process happen.

I should also add that the economy is starting to boom again in Phoenix. I have tons of construction jobs and landscaping jobs in addition to my part-time job.