Other California cities likely to follow Vallejo into bankruptcy 

The B-word — bankruptcy — is being bandied about in Stockton these days as the city faces a $37 million budget deficit with no light at the end of the fiscal tunnel.

Mayor Ann Johnston uttered it recently, telling local civic leaders, “We will do everything, absolutely everything, in our power to avoid bankruptcy.”

Vallejo filed for bankruptcy a few years ago under circumstances that are remarkably similar to those now facing Stockton. Both cities experienced rapid population growth as developers threw up subdivisions during the late and unlamented easy mortgage money bubble and house-hungry Bay Area commuters staged a feeding frenzy.

Both cities had seen their industrial employment bases erode and seized on the housing boom as an economic renaissance. Development fees, property taxes and sales taxes from new shopping centers poured into city treasuries. Officials responded with lavish contracts for city employees, especially police and firefighters, when unions applied pressure.

Stockton also sensed an opportunity to resuscitate its somewhat dilapidated downtown and borrowed to build a new baseball park, a new sports arena and a new marina, none of which came close to breaking even.

The marina cost $22.4 million to build, or more than $300,000 per berth, which is far, far more than any reasonable cost-benefit analysis would have supported. After its opening, the city revealed that the marina would cost the city treasury about $700,000 a year in operating subsidies.

The marina, the ballpark and the arena drain some $3 million a year from city taxpayers — money that’s not available for legitimate civic purposes.

Stockton has laid off police officers and made other cuts to close its looming budget gap, and the city’s relationship with its police union is so contentious that union leaders bought a home next to the one occupied by the city manager in an ill-disguised effort at intimidation.

Vallejo and Stockton are not alone in feeling fiscal distress. Throughout the state, local governments — especially those that bought into the housing bubble — are struggling with their budgets.

They are, ironically enough, following a pattern set in the state capital, where governors and legislators also overspent windfall revenues and then dealt with the resulting deficits with gimmicks and borrowing, rather than face the music.

When former Gov. Gray Davis and legislators approved a massive expansion of state employee pensions, for instance, most local governments quickly followed suit.

Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.

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Dan Walters

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