Californian cities under financial siege

US voters seek fiscal relief after three municipalities in the West Coast state filed for bankruptcy this summer.

Stockton is the largest city in the United States to file for bankruptcy [Al Jazeera]
Stockton is the largest city in the United States to file for bankruptcy [Al Jazeera]

Stockton, California – While President Barack Obama and GOP candidate Mitt Romney maintain a breakneck schedule in battleground states where crucial votes are up for grabs, states already determined to be majority Democratic or Republican are cast out of the spotlight.

That does not mean, however, they don’t have issues they wish Obama and Romney would address in their campaigns.

Take California – a true “blue” state that tilts Democratic, with a Republican “red” Central Valley – a spine of small and medium-sized towns, mostly agricultural and a far cry from the slick coastal characters such as San Francisco and Los Angeles.   

Californian cities struggle with financial pressure  

In the span of weeks this past summer, three California towns – Mammoth Lakes, San Bernardino and Stockton – filed for Chapter 9 bankruptcy protection. 

Small and medium-sized towns face major deficits amid double-digit unemployment, massive home foreclosure rates, and tax revenues redirected by the state, preventing them from spending what was earmarked as redevelopment funds on their own communities.

Stockton is the largest city in the US to file for bankruptcy. The real-estate boom it experienced in the late 1990s and early 2000s has dissolved into utter fiscal despair.

According to the US Bureau of Labour Statistics, the city’s unemployment rate has hovered at between 15 and 22 per cent since 2008, compared to the national rate of roughly 8 per cent. Stockton also jockeys with Las Vegas for the position of having the largest number of home foreclosures in the country.

And it is far from alone.

Fresno is in deep trouble. Merced is in trouble. Modesto is in trouble,” said Stockton Vice Mayor Kathy Miller, naming towns south of hers on Highway 99.

“We’re talking hardship, but nobody seems to get it – and I’m including the coastal cities in our own state. They don’t get it,” said Miller.

“Our state legislators have consistently balanced their budget so that they can continue overspending on the backs of their cities and counties,” she said, referring to the $1.7bn the state has seized in redevelopments funds.

She’s given up on the state government for help and wishes the rest of the country – including the presidential contestants – would take note.

In addition to creating more programmes targeting those who have lost jobs and homes in bankrupt towns, the federal government could protect crucial property tax streams by preventing prices of foreclosed homes from being re-evaluated at low rates, potentially cutting tax revenue in half.

“Neither [Obama or Romney] have addressed that,” said Miller

“But…well, considering we’re the eighth largest economy in the world, I mean, we matter.”

Chronicling the crash

Mike Klocke can remember better times in Stockton.

California’s bankrupt municipalities


Filed for bankruptcy protection: June 28

Population: 290,000  

Budget deficit: $26m  

San Bernardino

Filed for bankruptcy: August 1

Population: 209,000

Budget deficit: $46m

Mammoth Lakes

Filed for bankruptcy: July 3

Population: 8,000

Budget deficit: $2.8m, in addition to $43m court settlement it owes a developer for backing out of a deal

The editor of the only daily newspaper covering the city, The Record, recalls the housing boom in the ’90s that brought people here from as far as the Bay Area.

“They could get two or three times the house for the same price,” said Klocke, a Michigan transplant. He said the crime rate has increased, with 58 murders in 2011.

City-wide belt-tightening has led to a cut in pay and benefits, prompting the exodus of roughly 100 police officers. “I’m hearing people saying, ‘I’m not sure I can live here anymore,'” said Klocke.

The George W. Bush years were unkind to the Central Valley. Its poverty, unskilled workforce and high unemployment prompted the authors of a 2005 Congressional report to compare the area to the deeply impoverished Appalachia region.

Klocke’s publication mirrors the city’s own struggles as it tries to cover every angle from a shrinking newsroom, a symptom of the struggling economy and of the flailing US newspaper industry.

Its coverage explored the lead up to the city filing for bankruptcy protection and all that followed, from the political wrangling, the pitched battle with Wall Street insurers, and the real human consequences of city-wide fiscal bleakness.

While national media attention has been paid to Stockton’s plight, the federal government hasn’t had much to say about it.

Record reporter Scott Smith said when he called the White House for a comment on the bankruptcy filing, he heard “nothing, not a word”.

“It shows their regard for the crisis,” said Smith.

While Obama has instituted a limited aid programme to help homeowners in danger of losing their homes, it has not been enough to stem the tide of foreclosures.

“Obama’s done nothing, and Romney has said that he won’t do anything,” said Michael Fitzgerald, metro columnist. He was referring to 2011 footage of Romney saying he’d suggest “not trying to stop the foreclosure process, let it run its course and hit the bottom and allow investors to buy the homes”.

Still, frustration with the president’s slow response to what Fitzgerald describes as the Central Valley’s “Great Depression, Part II” could “make this blue state turn red”.

“Romney is reinventing his record to sound like a moderate, so who knows what we’ll get if he gets elected,” said Fitzgerald.

‘We need a lot of things’

More communities are considering filing for bankruptcy because of budget deficits caused by low revenue or the high cost of pensions and benefits to city employees.

It was reported this summer the city of Compton, 27km south of Los Angeles, considered filing for bankruptcy, although city officials said they would not do so at this time.

Fresno, 200km southwest of Stockton, is also struggling, and further still down Highway 99 there’s more strife and talk of bankruptcy.

Atwater, 106 km south of Fresno, is the definition of small town – just two highway exits, a speckled landscape of farms and single-story homes, and a population of 28,000.

Everyone knows each other here – businesses and farms have been owned by the same families for generations. The ones doing well are only enjoying a short-term benefit from the bust.

Sharon Roper’s family has been the town’s locksmiths for more than 30 years, with the business being run by her son now.

Roper, 75, said she had to step in and help because the flood of repossessed homes in the wake of the mortgage meltdown meant locks needed to be changed in towns up and down the highway.

But not everyone is so lucky.

Jean Kirby, 69, who runs Granny’s Pantry, an old-fashioned breakfast and lunch café, says keeping her 10 employees on the payroll has been hard.

“There are no jobs – we’re trying to hold on to our people because they have families too,” said Kirby, who has worked at the café for 33 years and co-owned it with her son in law for the past decade.

“No one knows what it’s like to live this way,” said Kirby, who would like the president – whoever he is – to give small businesses such as hers a tax break.

Having gone through four city managers in 18 months and facing a $3.2m budget deficit, Atwater could use some help.

“We need a lot of things. We have 16 per cent unemployment, and those people need support,” said Atwater Mayor Joan Faul.

“What we don’t need is to be forgotten just because we can’t afford to line their campaign coffers.”

Massage therapist Kelly Lowe said contrary to what GOP vice presidential candidate Paul Ryan said during his October debate with Vice President Joe Biden, Obama’s recovery plan is working.

“Please – this is exactly what a recovery looks like. It goes in fits and bursts. It fizzles a bit, then it picks up,” said Lowe.

“We just need to stop and take a breath.”

Stockton’s Vice Mayor Miller is optimistic about the future. Filing for bankruptcy does not necessarily mean an apocalyptic future. Orange County declared bankruptcy in 1994 – and the sky did not fall.

“A year from now, people are going to be looking at Stockton saying ‘that’s how you should do it,'” said Miller.

“We’re going to come out of bankruptcy strong – we’re going to be the General Motors of municipalities.”

Follow D. Parvaz on Twitter: @Dparvaz 

Source: Al Jazeera

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