Photo courtesy of Ben Margot
By Peter Hecht
Published: Sunday, Jun. 24, 2012 - 12:00 am | Page 1A
Last Modified: Sunday, Jun. 24, 2012 - 3:12 pm
Barely five years ago, Stockton looked like a winner.
Local real estate values quadrupled between 2000 and 2006. City tax revenues skyrocketed. Stockton's general fund was growing by 10 percent a year. The port city redeveloped its waterfront and built a new arena. It gave pay raises to cops and cut deals in 2007 to boost pensions and pay for other employees.
Now Stockton is broke.
After years of bad budget decisions based on an overly rosy reading of the economy, Stockton – population 292,000 in 2010 – this week faces the ignominy of becoming the largest city in America ever to file for bankruptcy.
The City Council has scheduled a vote Tuesday on an austerity program that the city could carry out while in Chapter 9 bankruptcy reorganization, which would provide protection from creditors while it renegotiates its debts. Plans are to slash retired employees' health benefits, and perhaps eliminate them altogether; end city bond payments, and restructure labor agreements.
"The city is insolvent from a service and budget basis today and faces cash insolvency in its general fund by July 1," City Manager Bob Deis wrote to the City Council on June 5 – the same day the council voted to give Deis authority to take Stockton into bankruptcy reorganization.
In an effort to avert a bankruptcy filing, Stockton held last-minute negotiations to seek concessions from bondholders, employee unions and retirees. The city manager is scheduled to tell the City Council on Tuesday whether sufficient savings were found by the Monday deadline.
Deis could not be reached for comment last week. But in a letter he sent to employees on Thursday, he suggested that no miracle rescue is in the works. "At this point, the city must make plans to move forward and use the services and protections in bankruptcy to preserve basic health and safety services for the citizens of Stockton," Deis wrote.
This is not what city leaders had in mind.
Stockton was the place where the median home price shot up from $110,000 to $400,000 in six years. The city issued 3,000 new residential building permits a year between 2003 and 2005.
It was the place with the $129 million waterfront redevelopment, including a gleaming new $68 million arena for a minor league hockey team.
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