[quote=CA renter] . . .
7. This is an analysis of Stockton’s financial situation and how it got there. The cause of Stockton’s financial problems is not pensions, but the fact that growth rates in revenues, asset values, and investment earnings were grossly overstated (and future liabilities grossly understated, since they are tied together in many cases) because of the boom/bust nature of our economy. When things crashed it hit EVERYTHING at once, truly magnifying ALL of the problems that could possibly be experienced by a public entity at any given point in time.
It is this drive for, and dependence on, excessive growth that I think needs to be addressed at a local and national level. . . .[/quote]
I downloaded and carefully skimmed over the report by cacs.org, entitled: “California Common Sense – How Stockton Went Bust.”
It dealt with the aftermath of the bad decisions by Stockton’s PTB, but it never addressed the crux of the problem, which is what I call, “the chicken and the egg syndrome.”
It mostly detailed the “promises” the city made to unions when they felt “rich” (from incoming property tax revenues and MR bond proceeds) and also addresses the steps they took to mitigate their financial problems when they “belatedly” (lol) discovered them, as detailed on pg 4:
By the time the city realized the severity of its crisis, it was too late to make any structural changes to its 2007-08 budget, but Stockton did respond quickly by initiating a hiring freeze for 90 open positions on May 15, 2008. But the city still ran a $5 million budget deficit for that year. The next year saw a $1 million deficit, followed by a $7.5 million deficit in 2010. To compensate for these deficits, Stockton depleted its already scant reserves.
I noticed that the report didn’t address OR lay the blame at the feet of the city council for its p!ss-poor judgment and horrendous mistakes it made (which were actually the catalyst setting off its long spiral into BK). This is exactly where it belongs.
Q: Why did Stockton’s PTB feel they had to hire so many new employees between 2001 and 2008?
Ans: Because the city grew exponentially.
Q: Why did it grow so much during those years?
Ans: Because there was a lot of new construction available there which was much cheaper than that in adjacent, more “close-in” counties.
Q: Why was there so much new construction in Stockton between 2001 and 2008?
Ans: Because its council allowed Big Development to develop several miles outside of the complete radius of the city.
Q: Why did they do that?
Ans: Since there were no fundamentals (such as local job creation) to support an influx of population, one is only left to surmise that they wanted the greater property tax revenue (bigger share of “teeter funds” from Sac) and MR bond revenue (for infrastructure) which would cause their “umbrella” (read: employee count) to be bigger to service these new areas, giving each of them (and all of them, collectively) more (perceived) regional “power.”
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How MUCH bigger of a workforce would the city’s leaders need to service these outlying subdivisions?
It is clear here that they really hadn’t thought this through. When approving new subdivisions right and left, it likely never occurred to any of them that the buyers of these far-inland exurban tracts were buying into them for just ONE reason (*new* construction cost far less than that in adjacent counties). In addition, these buyers were a population who had to commute a l-o-o-ong way to work (IF they were actually gainfully employed) and were undoubtedly accustomed to being heavy users of pubic services. The council simply slid by the seat of its pants approving new position after new position for the ensuing years (as they were sorely needed) to service their *new* population.
When all was said and done, 90% of these new “homeowners” ended up defaulting on their mortgages AND property taxes!
Duhhh …
This is just another instance of “unchecked greed” at the hands of yet another CA power-hungry city council. Without the “loose lending” practices of the “millenium boom” in place, Stockton’s new buyers would have never come as this area never generated enough *new jobs* (and in any case, its existing job base did not pay high enough) to even attract enough buyers for ONE small subdivision.
Stockton is NOT a scenic byway and/or cultural “retirement haven.” Newcomers (without access to “funny $$ purchase-money funds”) who move there do so for only two reasons: to be near/help out family members and to help out in the family biz.
The loss of much of Stockton’s fertile land and irrigation and increase in its watershed was all for naught.
Again, the blame for Stockton’s BK lies directly at the feet of the city council and no one else.
Had the city never allowed a large portion of their available agricultural land to be raped by Big Development, they would have never doubled their workforce and BK would have never happened.
Yes, even with an increase in healthcare costs for its existing (`00/`01) workforce … the BK would have NEVER happened.
