Stockton is on the verge of becoming the largest American city ever to declare Chapter 9 bankruptcy.
The Stockton City Council is expected to take action Tuesday that will essentially suspend many bond payments plus set the stage to enter receivership.
How Stockton got to the point it has is a morality tale for any jurisdiction within Inland California that is under the influence of the much wealthy Coastal California.
Stockton from 1998 literally exploded with growth. But it was not growth created by healthy local job development rooted in manufacturing or other solid sectors. It was growth created by the fact the much wealthy Bay Area had done little, if anything, to address affordable housing.
As a result, a great exodus started over the Altamont Pass that dwarfed the commute surge of the 1970s and 1980s in volume and in money.
The result was a housing boom that saw prices triple between 1998 and 2005.
To be sure, there were jobs generated from the housing boom. But they have tended to be primarily service, retail, and health-related jobs. Some cities in the shadow of the Bay Area economy did manage to create some higher paying jobs such as Tracy, Manteca, and Lathrop. They were primarily the result of industries and businesses serving the Bay Area markets that - just like commuters who moved from the Bay Area - went east looking for affordability and the ability to grow. The jobs generated from these concerns weren’t enough to raise the tide to anywhere near the level of the Bay Area. As a result, those who worked and lived in the Northern San Joaquin Valley found themselves getting squeezed out of the housing market.
New residents also put pressure to expand services at a pace that was growing faster than the tax base that for al lpractical purposes depends on housing property taxes.
Cities - faced with unprecedented competition from Bay Area municipalities for experienced workers such as police, firefighters, wastewater treatment plant technicians, and such - had to start upping wages to keep experienced workers.
Then the return to sanity started in 2005. Since then property tax receipts have dropped 25 percent. Nowhere has it been worse than in Stockton which has the nation’s second highest foreclosure rate behind Las Vegas.
Some cities such as Manteca, Lathrop, and Ripon started reacting sooner with deep municipal budget cuts. And since 80 percent of a typical city’s general fund goes to salaries and benefits the only real solution was trimming back employee compensation. In many cases it involved not simply getting municipal workers to freeze raises but to trim positions and to make compensation concessions. In Manteca alone, the average employee lost 30 percent plus in terms of pay and benefits.
Had Stockton tried to reverse course sooner it may not have struck the financial iceberg.
Manteca owes much of its ability to stay afloat and keep services intact for the most part not just to making hard decisions but because municipal employee groups stepped up. If it hadn’t been for them, Manteca would probably be flirting with bankruptcy today.
Manteca no longer has a structured deficit thanks to long-term employee contract concessions. It is spending only what it takes in each year. Stockton, on the other hand, has a $37 million deficit that’s a fifth of its general fund budget.
No one can take joy in what is happening to Stockton. Not only is it the county’s largest city but it contains about half of San Joaquin county’s population.
The good news is that there is a morning after.
Vallejo has turned the tide and so will Stockton.
This column is the opinion of managing editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209-249-3519.