How stockton Went Belly-up, and how to get out of financial woes.

Overbuilding
By Eric Schulzke

Stockton pushed for an arena complex, including a 10,000-seat hockey arena, a 5,000-seat baseball diamond and an attached hotel complex. When cost overruns drove up the cost, the city got creative. Johnston recalls the scene in when she was on the city council.

"The mayor was talking about wanting a ballpark on the waterfront. The city manager said, 'There is no money. We can't do this.' And the mayor said, 'Can't we take money from municipal utilities, can't we take it from community development?' 'No, it's not legal to do that,' the manager said," Johnston recalled.

"And so he was stymied," she said, "but he kept trying to figure out how he could do some of these projects."

Eventually, a new city council was elected and a new city manager hired. "The city manager got an opinion from some attorney over in Oakdale, who said, "Oh yeah, you can borrow from municipal utilities," Johnston said.

So to help build the arena, the city raided dedicated sewer and water funds, which were legally segregated and not available for building projects.

But the Oakdale lawyer was wrong. Several years, $145 million and one lawsuit later, the city agreed to pay back to the stolen funds. With interest, it will cost the city $1 million a year over 30 years to pay back the $10.9 million it raided for the arena complex.

Altogether, the new complex cost more than $135 million in bonds. Unlike the parking garages and the office building, both now repossessed, the city has held onto the arena complex and the theater — subsidizing annual operating losses as it struggles with the construction debt.

Did you notice Ann Johnston stating that "they" the city council was responsible for these expenditures, and she she was one of them! And she admits to using funds for other departments for the cost of construction!

Mepco Is packing up and taking more than 100 jobs to Lodi

Risk and ambition: Stockton's bankruptcy a morality tale for cities around the nation

By Eric Schulzke, Deseret News

Sworn police staffing in Stockton, Calif. dropped from 1.52 per 1,000 residents in 2005 to 1.16 today.
Ben Margot, Associated Press

This is part one in a two-part series.

Read part two: Pixie dust: How Stockton gambled its way from bad to worse.

STOCKTON, Calif. — The marina is beautiful, sparkling and new. So are the baseball park and the hockey arena, home to the Stockton Ports and the Stockton Thunder. Across the street is a stunning refurbished historic theater. The facilities glisten in the evening August sunshine, while teenagers do backflips off a pier and children fish for bass.

A stone's throw away is Stockton's City Hall. Above the entrance is an "All-American City" banner, reflecting faded glory from awards won in 1999 and 2004, but beneath the banner the lamp post foundations are badly cracked. It's one of many clues around the city that something has gone badly awry here.

Wells Fargo repossessed an eight-story office building meant to be a new city hall earlier this summer. The city had defaulted on its loans. The bank also seized underperforming parking garages, which the city built when boom times seemed here to stay.

At a city council meeting in that fading city hall on that warm August evening, the word "bankruptcy" is never mentioned but lies heavy in the air.

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