With about 300,000 inhabitants, Stockton, California would be the largest city in the history of the United States to go belly up. This is likely to happen on Tuesday; the city has huge debts for white elephant development projects along with massive unfunded retirement and health care obligations, and its tax revenues have gone down the toilet as property values collapsed.Stockton clearly has some of the dumbest municipal leaders in US history. They fell for all the crazy ideas that have caused cities around the country to lose their shirts: expensive new sports facilities, a shiny watefront, a fancy new city hall, an arena. (Neil Diamond opened the arena with a $1 million taxpayer funded concert back in 2006.)This wasn’t enough for them. They promised the sun and the moon and the stars, including free lifetime healthcare for retirees, to city employees. To make sure they could pay, the city’s leadership took out large loans to make a risky market investment. (The investment has lost a fifth of its value.)But why not live a little, the city leaders thought. Real estate values were soaring and the city was in the midst of a massive construction boom.Now Stockton is the foreclosure capital of America. It has cut the police force by 25 percent even as crime soared. Street gang members apparently taunt police officers by asking them when they are going to be laid off. Fire fighters have been cut 30 percent. Other city employees: 40 percent.Those beautiful retirement health care benefits are gone with the wind; slashed by up to three quarters now, and probably they will be eliminated completely. It’s likely that in bankruptcy court retirees will have their pensions cut back. There isn’t any money to pay them.It’s easy to mock the stupidity of Stockton’s leadership, but the bad ideas that got the city into trouble are pretty widespread. How many downtowns in America have been the scene of foolish urban development projects that never really work? Pedestrian malls without pedestrians? Shopping arcades without shoppers? How many white elephant convention centers and sports arenas have foolish city governments (often under pressure from construction companies and unions) funded over the years? How many jurisdictions have assumed that temporary revenue increases in boom years were here to stay and added permanent positions and costs on that assumption? How many cities and states have made glittering promises about retirement benefits and health care to their workers without making prudent provision to honor those promises when the bill comes due?Stockton is an exceptional case of greed meeting stupidity, but it is not alone in facing these kinds of problems. Americans around the country need to pay more attention to state and local policies and politics than they do; the citizens of Stockton will be paying for their leaders’ mistakes for decades to come.
Biggest Urban Bankruptcy in US History Coming Tuesday?
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