Nick Allen – Stockton, California, Set To Be Biggest US City To Be Declared Bankrupt – 23 June 2012

When 10,000 citizens of Stockton, California sang along with Neil Diamond at the opening of their city’s shiny new concert hall it seemed like the good times would roll forever.

It was 2006 and local officials were happy to pay the musician $1 million in taxpayers’ money to perform Sweet Caroline as they rode high on the back of a turbocharged housing market.

However, the concert has come to symbolise the staggering financial irresposibility that now has the city staring into an abyss.

Barring a last minute reprieve, Stockton, which has a population of 300,000, will become the largest city in American history to file for bankruptcy on Tuesday.

Its demise is perhaps the most extreme example of a nation’s boom-time spending splurge, and a cautionary tale of what happens when the bills finally have to be paid.

“I have nothing personal against Neil Diamond but that was just a huge waste of money,” said Ann Johnston, the current mayor charged with cleaning up Stockton’s financial mess.

“It was a time of excess, of grandiose dreams and gross ambition. We were super extended financially and then the economy tanked. There was nothing in reserve for a rainy day.

“We’re like a homeowner who took out second and third mortgages and then everything crashed. We will be cash insolvent by the end of this month. We cannot pay the bills.”

Stockton, which sits in California’s agricultural Central Valley 80 miles from San Francisco, began life as a transport hub for the gold rush 160 years ago.

It was once called Mudville and latterly became known for its Asparagus Festival and is little visited by tourists.

But at the height of the economic boom, 3,000 new homes a year were being built in Stockton and its population grew by 20 per cent in a decade as it sought to join the San Franciso commuter belt.

In addition to its still gleaming $80 million glass fronted concert arena, a 5,000-seater ballpark also went up for the local minor league baseball team, and a picturesque marina was built.

A $42 million superyacht, the Casino Royale, currently dominates the marina. It shimmers like a mirage in the blistering California sun, while in its shadow a homeless man pushes a supermarket trolley slowly by.

During its glory days the city also paid $2 million to a renowned California chef to open a bistro in town, which didn’t last long.

Stockton splashed out $35 million on a modern eight storey building which was to be a new city hall.

Officials never moved in and it was repossessed by the bank a few weeks ago, along with three of the city’s multi-storey car parks.

At the current crumbling city hall, a banner outside reads: “Stockton – All America City.” Inside, the tap water is undrinkable and there are rats.

“That’s the ones that haven’t abandoned the sinking ship,” said Michael Fitzgerald, a columnist for The Stockton Record.

Due to its massively inflated housing market and soaring debts, Stockton was hit like a freight train when the recession eventually came.

Its home foreclosure rate was the highest in America, property values dropped by up to 75 per cent, businesses went under, and unemployment is currently at 19 per cent.

The council’s revenues from property and sales taxes were decimated by the downturn. In addition, it had given away sumptuous benefits to city employees including medical care for life for each public employee and their spouse.

The “Cadillac” health care plan left them with an estimated liability of $417 million.

Officials are currently in mediation talks with creditors over $350 million the city owes bond holders. Those talks end on Monday and, if they fail, bankruptcy will commence the following day.

Mrs Johnston, a former English teacher, has already wielded the axe heavily, slashing public sector staffing and pay.

The 425-strong police force has been cut by 25 per cent. The result has been crime wave with a record 58 homicides last year. Street gang members taunt the remaining officers by asking them when they are going to get laid off.

“We have cut to the bone,” said the mayor. “There is nothing left to cut, and we have to maintain public safety. If bankruptcy happens those things that are needed for the necessities of life will continue. We will maintain basic services.”

On Stockton’s once proud Main Street, near the repossessed would-be city hall, business after business is boarded up or empty. The few that remain include a medical marijuana shop and a thrift store.

Incongruously, a shop that repairs Steinway pianos is also still open. Owner Marcia Davis, 61, told The Daily Telegraph: “We’ve survived by reputation and word of mouth, and we’ve made a wonderful life here.”

At a nearby street corner a recovering heroin and crystal meth addict called Nikki, 35, was less sanguine. She said: “It’s nasty and dirty here.

It’s gone to crap. Just look at the run down buildings.”

Less than a mile from where the superyacht is anchored the morning queue at Stockton’s food bank starts 90 minutes before opening time. Under a flyover on an industrial wasteland more than 400 people line up each day for a box of donated produce.

Denene Howland, 45, who had swallowed her pride to visit the food bank for the first time, bought a two bedroom house in 2005 for $215,000 with her husband Ralph, a labourer. The house was foreclosed in 2009.

She said: “We couldn’t make the payments. When we lost it someone then bought it for $60,000. The realtors had just taken advantage of idiots like us.

“I still go past the house and that does kind of make me sad. For a while it was like the gold rush back then, and then people were cutting each other’s throats. I don’t think President Obama’s really done much. He just seems to have a lot of parties at the White House.”

Another first time visitor to the food bank, in his wheelchair, was Vietnam veteran, Ken Hundley, 64, who had suffered four strokes. The former truck driver lost his home to foreclosure a year ago and is in welfare housing.

Hundley’s eyes welled up as he said: “I’m embarrassed to be here. I fought for this country and suffered the effects of Agent Orange for decades.”

Near the city dump a mini-skid row has sprung up with tents and cardboard shelters. More than 400 people, a third of them children, sleep at the nearby Shelter for the Homeless.

The shelter’s director John Reynolds said: “I’m seeing people that shouldn’t be here, people that had good jobs like electricians, nurses, retail managers, people with businesses, people who were living in four or five bedroom homes.”

As the city awaits the bankruptcy verdict, Mrs Johnston said: “This recession keeps dragging on and we are still at the bottom. Neil Diamond will not be coming back.” / link to original article  thanks to Stephen Cook from link to article

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