The city of Stockton’s roller coaster ride is finally over.
Six years ago, the city was riding on a high—home prices shot up as much as $400,000 and the waterfront development with the $68 million arena was expected to bring in big bucks to the local economy.
Then the recession hit. Hundreds of people lost their jobs and home prices sunk to an all-time low. The city had the second highest rate of foreclosures in the nation. To top it all off, it invested $125 million in a pension fund that tanked. This is where the ride hit the big downhill slope.
In order to get their finances back in order, the city council voted 6-1 to stop bond payments and make deep cuts in retiree health care as part of a plan to file for Chapter 9 bankruptcy.
Stockton is now the largest city in America to declare bankruptcy. It’s not exactly a distinction the 300,000 residents want to be branded with, but it’s their reality now.
Despite how dire things look in Stockton, it’s not all gloom and doom yet.
Just look at the city of Vallejo four years after it was once the largest city to declare bankruptcy.
In 2008, Vallejo was Stockton.
The city became something of a poster child for the failures of local city budgeting. Its cash reserves bottomed out and it was unable to pay bills as property tax revenues plummeted and the cost of employee compensation and pensions soared.
With no relief in sight, city leaders decided to go Chapter 9.
They also decided to use their time wisely by changing their habits in the past few years by spending more wisely, studying best practices from around the world, and implementing them at home.
Then, surprisingly, city leaders proposed a deal with residents—agree to a one penny sales tax increase, projected to bring in an additional $9.5 million in revenue, then vote on how the money would be used.
In a deal that sounded too good to be true, voters approved what’s called participatory budgeting. It began in April and it’s the first time a North American city has done it.
It’s taken Vallejo three years to get out of bankruptcy. So you see Stockton, there is light at the end of the tunnel.
But Stockton will have to be the next to prove that it has to get worse before it can better.