Stockton City Council considers insolvency steps tonight | News
STOCKTON, CA - The Stockton city manager is pushing the city council to approve a 60-day mediation process with creditors, the first step required under a new state law before any California city can seek bankruptcy.
Native Stockton residents like John Engelund hope that doesn't happen because it wouldn't be good for a city that's suffered so much.
"No, it's not at all. It's not at all," said Engelund. "It's nothing to be proud of if anybody does that. I think it'd move Stockton further back."
For years, the city of nearly 300,000 people was flush with cash from the housing boom.
Among its financial mistakes: The city required only one month of service to be eligible for retiree health benefits for life and generous labor contracts that had hidden costs.
Today, California's 13th largest city, twice dubbed the "most miserable city" in the U.S. by Forbes, has the second-highest foreclosure rate in the country behind Las Vegas and city coffers can barely cover the bills.
Insolvency would give Stockton the distinction of becoming the largest American city to file for bankruptcy.
Business owner Douglas Lennard says maybe it's time to wipe the slate clean.
"I think it'll validate the bottom here and verify with everyone that the system here is broken and it's in definite need of repair," Lennard said.
Fitch already downgraded Stockton's water bond to BBB-, the lowest investment grade. Bankruptcy talks make municipal bond investors nervous, wondering who could be next.
"I think that's the major concern is ... not just what's happening in Stockton, but the perception of this being able to happen elsewhere," said Joe Eshleman, Wells Fargo Advisors Investment Officer.
Stockton has twice declared a fiscal emergency that allowed the city to force changes in labor contracts. Among the most noticeable is the paring-down of police officers to only 300 despite the city ranking eighth in the U.S. for most violent crime per 100,000 residents.
The Miracle Mile District has had to hire private security because cops took hours to respond.
"Unless it's an in-progress crime, maybe someone shot, stabbed, something like that, the police department has made it very clear, those calls take priority over any cold call that's already happened," said Arnold Chin with the Miracle Mile Improvement District.