Stockton, California

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Stockton is a city of nearly 300,000 in northern California.[1]

Lobbying

Main article: California government sector lobbying

For 2007 and 2008, Stockton spent $72,000 on lobbying, the Stockton Redevelopment Agency spent $108,000, and the Stockton Department of Parks and Recreation spent $29,750. Total, the city spent $209,750 in those two years.[2]

Bankruptcy

Main article: Bankruptcy option for local governments

Bankrupt

A federal judge approved the city of Stockton's petition for bankruptcy on April 1, 2013. The judge rejected the creditors' claims that the city did not negotiate in good faith to resolve its debt. On the contrary, the judge ruled it was the Wall Street bondholders who refused to negotiate new terms unless city officials slashed the millions owed to the California Public Employees' Retirement System.[3]

Bankruptcy means creditors can expect to receive a fraction of the $165 million in loans they guaranteed in 2007 so Stockton could pay its pension obligations.[4]

In his ruling Judge Christopher Klein said the city needed bankruptcy protection for both its fiscal and social well-being. "It is clear that the city would not be able to perform its obligations to its citizens, such as fundamental matters of public safety," the Sacramento Bee reported.[5]

The city had to grapple with sharing the financial burden among creditors while meeting its massive state pension obligations. The city's largest debt was $900 million owed to CalPERS.[6] After spending more than $4 million in legal fees to fight the creditors' bankruptcy challenge, the city had to negotiate terms to resolve hundreds of millions of dollars in debt. Even with bankruptcy protection, it faced budget deficits estimated at $100 million over the next 10 years.[7]

Stockton slashed $90 million in staff and services over three years and laid off a quarter of its Police Department as it slid to insolvency.[8]

2014 Pacific Research Institute report

In January 2014, the Pacific Research Institute, a California-based public policy organization, issued a report on the largest Chapter 9 municipal bankruptcies across the United States as well as other municipalities facing financial straits. The municipalities included in the report were Stockton, Detroit, MI, New York City, Harrisburg, PA, San Jose, CA, and San Bernardino, CA.[9] According to the report, Stockton faced a 2012 budget deficit of $26 million prior to its bankruptcy filing. Stockton also owed the state's public employees' retirement system (CALPERS) $147.5 million in unfunded pension costs, including $124.3 million of pension obligation bonds, $40.4 million in other obligations, $35.1 million of public facilities fees bonds and $31.6 million of the city’s parking garage debt.[9] The city also attempted to deal with the pension costs by approving an increase in the local sales tax, which included a 50% cut to the city's bondholders and eliminated some retirees' health benefits.[9]

Filing for Bankruptcy

Stockton became the biggest city to file for bankruptcy when it filed for Chapter 9 on June 28, 2011.[1] After slashing more than $90 million in spending in recent years to a point where city officials said further cuts would endanger public safety,[10] Stockton's crisis was brought about in part by the city's borrowing and spending on downtown development projects based on overly optimistic revenue predictions that did not materialize.[11] In 2013, a Judge approved of Stockton's bankruptcy status, making it the largest city to successfully file for bankruptcy.[12]

The Stockton City Council had voted on Feb. 28, 2012 to use a new California law, Assembly Bill 506, to enter mediation with its creditors. City leaders said they saw the move as a bid to avoid bankruptcy, while critics said it was the first step toward bankruptcy. The law required local government agencies to undergo mediation or hold a public hearing and declare a fiscal emergency before filing for bankruptcy.[13][14]

Lengthy confidential talks with the city's creditors failed to produce the creditor concessions necessary for the city to close its $26 million budget gap.[10]

Stockton's bankruptcy plan aimed for bondholders and its employees and retirees to suffer losses to address the city's financial shortfall, including defaulting on bond payments, cutting employee compensation and scrapping lifetime medical benefits for retired employees as cost-savings moves, but those impacted say that they plan to fight that plan.[10]

National Public Finance Guarantee Corp. challenged the validity of Stockton’s bankruptcy, arguing the city didn’t negotiate with the California Public Employees’ Retirement System, its largest unsecured creditor with a $147.5 million claim. The bond insurer said Stockton’s proposal to reduce debt unfairly places the burden on debt holders without forcing Calpers to make concessions and still leaves the city insolvent over the long term. National insures about $93.8 million in bonds issued by the city.[15]

Employee Health Benefits

After filing for bankruptcy the city adopted a budget that included unilaterally reducing retiree health benefits. That was challenged by a lawsuit which argued that the contracts clause of the U.S. Constitution guarantee that the benefit can't be altered.

U.S. Bankruptcy Court Judge Christopher Klein disagreed. In his opinion he wrote "In sum, even if the plaintiffs' benefits are vested property interests, the shield of the Contracts Clause crumbles in the bankruptcy arena."

About 1,100 retired Stockton employees have the city's health care plan. The city's cost to cover them this year would have been $9.2 million.[16]

Police Department

Stockton's city manager sent a letter to the California governor urging pension reform before the city loses many of its police officers. Several years of deep budget deficits have shrunk the Stockton Police Department by 25 percent, and forced deep cuts in pay and benefits for remaining cops. Many veteran officers have departed for other agencies throughout the state.[17]

Pensions

Services are being cut in order to pay for unusually high pensions in each of the California cities that have declared bankruptcy. The former Stockton Police Chief Tom Morris is collecting a $204,000 pension after only working eight months on the job, and while he's cashing in on $76,066 salary at a new job in a new city.[18]

Conflict over police pension reform

During pension renegotiations between the city and the police union to address increasing labor costs leading to a $40 million budget hole, the union purchased the home next door to Stockton's city manager. The union claimed the purchase was an attempt to diversify its investment portfolio. Prior the purchase the city had cut fringe benefits and eliminating 25 percent of city staff. To meet financial obligations, the city considered eliminating another 16 percent of its work force.[19]

According to the Wall Street Journal the union owned home was the scene of "noisy renovations." The union also paid for billboards welcoming visitors to "the 2nd most dangerous city in California" and warning that "due to cuts in the budget, we can no longer guarantee your safety." The city manager's telephone number was also included on the sign.[20]

Although the city declared bankruptcy in 2012, the city manager ruled out modifying police pensions and the union has agreed to sell the home next to the city manager's.[21]

Website evaluation

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Budget
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Meetings
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Elected Officials P
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Administrative Officials
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Permits, zoning
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Audits
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Contracts P
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Lobbying N
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Public Records N
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Local Taxes N
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Transparency grading process

See also: Evaluation of California city websites


This website was reviewed on March 12, 2012.

The good

  • Meeting schedules, agendas, minutes, and videos are posted.[22]
  • City council members are listed with term expiration dates, contact information, and an email contact form.[23]
  • Budgets are posted.[24]
  • Administrative officials are listed with contact information.[25]
  • Audits are posted.[26]
  • Bid opportunities are posted.[27]
  • Zoning[28] and building permit information is posted.[29]

The bad

  • Email addresses for city council members are not provided; only an email form is available.
  • City contracts are not posted.
  • No information is available on Taxpayer-funded lobbying.
  • Local tax information is not available.
  • No information is posted on how to obtain public records.

External links

References

  1. 1.0 1.1 The Washington Post "Another California city, another bankruptcy as San Bernardino joins Stockton, Mammoth Lakes" July 11, 2012
  2. State-Level Lobbying and Taxpayers: How Much Do We Really Know?, Pacific Research Institute
  3. USA Today, Judge OKs bankruptcy for Stockton, Calif., April 1, 2013
  4. USA Today, Judge OKs bankruptcy for Stockton, Calif., April 1, 2013
  5. http://www.sacbee.com/2013/04/01/5308036/stockton-bankruptcy-challenge.html/ Sacramento Bee, Lambasting Wall Street, federal judge allows Stockton to seek bankruptcy protection, April 1, 2013]
  6. ABC, Pension Issue in Stockton, Calif., Bankruptcy, April 1, 2013
  7. http://www.sacbee.com/2013/04/01/5308036/stockton-bankruptcy-challenge.html/ Sacramento Bee, Lambasting Wall Street, federal judge allows Stockton to seek bankruptcy protection, April 1, 2013]
  8. http://www.sacbee.com/2013/04/01/5308036/stockton-bankruptcy-challenge.html/ Sacramento Bee, Lambasting Wall Street, federal judge allows Stockton to seek bankruptcy protection, April 1, 2013]
  9. 9.0 9.1 9.2 Pacific Research Institute "Going Broke One City at a Time: Municipal Bankruptcies in America," January 10, 2014
  10. 10.0 10.1 10.2 Reuters "No release of details of Stockton bankruptcy talks" July 6, 2012
  11. The San Jose Mercury News "As San Bernardino declares bankruptcy, experts debate whether it's another fluke, or another domino" July 11, 2012
  12. State Budget Solutions, Judge Rules Stockton, Calif., to Enter Bankruptcy, April 1, 2013
  13. MSBNC.com "Stockton, Calif., takes 'first step towards bankruptcy'" Feb. 29, 2012
  14. LA Times, Stockton residents watch their port city slip away, March 12, 2012
  15. Bloomberg, Stockton Creditor Asks Judge to Dismiss City’s Bankruptcy, Aug. 9, 2012
  16. Sacramento Bee, Judge says Stockton bankruptcy can break retiree health guarantees, Aug. 26, 2012
  17. Huffington Post, Stockton Bankruptcy May Force 'Mass Exodus' Of Police During Crime Wave, Aug. 23, 2012
  18. RT, Bankrupt California cities slash public services to fund six-figure pensions, Aug. 4, 2012
  19. Wall Street Journal, Allysia Finley: To Serve and Protect—Police Pensions, Jan. 11, 2013
  20. Wall Street Journal, Allysia Finley: To Serve and Protect—Police Pensions, Jan. 11, 2013
  21. Wall Street Journal, Allysia Finley: To Serve and Protect—Police Pensions, Jan. 11, 2013
  22. Stockton "Meetings," accessed March 12, 2012
  23. Stockton "City Council," accessed March 12, 2012
  24. Stockton "Budget," accessed March 12, 2012
  25. Stockton "Departments," accessed March 12, 2012
  26. Stockton "Financial Reports," accessed March 12, 2012
  27. Stockton "Purchasing," accessed March 12, 2012
  28. Stockton "Zoning," accessed March 12, 2012
  29. Stockton "Building Permits," accessed March 12, 2012