Stockton California in Bankruptcy Court: Lifetime Benefits for City Workers, No Required Tenture

Stockton, California is the state’s 13th largest city by population – almost 300,000. Sitting in the San Joaquin Valley, where the Delta Smelt has caused the demise of countless agricultural ventures, the city had and the Valley had water everywhere except for farmers. A year ago, Forbes named Stockton America’s “most miserable town.”

Stockton, head of the Deep Water Channel from Water Street

Stockton, head of the Deep Water Channel from Water Street


Next to its gleaming downtown waterfront — a window to the West’s largest fresh-water estuary — a beautiful new $46 million glass hockey arena rose in 2005. That same year, an Oakland A’s minor league baseball team began play in a new taxpayer-financed stadium, amenities sought by elected officials catering to a wave of new residents fleeing Bay Area congestion and soaring home prices…

Within two years, Stockton had accumulated nearly $1 billion in debt on civic improvements, money owed to pay pension contributions and the most generous health care benefits in the state — coverage for life for all retirees plus a dependent no matter how long they had worked for the city.

“It’s not realistic to think that something like that could be sustained indefinitely,” Cochrane said.

But the holders of the biggest share of the debt were the companies that in 2007 insured nearly $165 million in pension bond obligations to allow the city a lower interest rate and make them stable for investors. They were unable to negotiate a deal and want the city to avoid bankruptcy, which would likely allow Stockton to avoid repaying the debts in full…

City politicians also lack the political fortitude to cut contributions to CalPERS, the public employee pension program, Assured officials say. Employees who shared in the wealth when times were flush ought to sacrifice when they are not, they say. Source: Fox News

Stockton The Most Miserable City?  (More at Forbes March 2012)

What it had bought in the boom years were a new ballpark, a city activities center, a new hotel, an ice rink, some parking garages and a lovely marina on that same channel the port uses. It had floated bonds to pay for all those goodies, many of which sit largely empty today. The bondholders — and it’s unclear exactly who they are since bonds often get traded — may not get paid back; some of the bonds are already in default. But it wasn’t just spending on buildings that pushed Stockton to the brink. Like most California cities, the city offers retirement at age 50 to police and firemen, at nearly (or in some cases more than) their last year’s pay. Plus, they decided that since so many city employees retire before they’re eligible for Medicare, the city would provide health insurance as an additional retirement benefit.

Calling on The Lord didn’t help:

Stockton was the polyester, buy-generic cousin, a dingy commercial hub for Central Valley farms that was just far enough from the San Francisco Bay area to be an irrelevance for the state’s coastal elites.

But then came the housing boom, and sorry Stockton practically started to strut. Its loamy farmlands – among the most fertile in the United States – gave way to shiny subdivisions. Middle-class families, priced out of the Bay area housing market, snapped up the new homes, happily trading extreme commutes for the suburban niceties of four bedrooms and a yard.

Mayor Gary Podesto, a colorful character given to slicked-back hair and Guys and Dolls suits, saw the sudden influx of developer dollars and property taxes as the key to an urban renaissance. He kicked it off with a plush downtown sports arena complete with a Sheraton hotel, and a swank redevelopment of the waterfront that transformed it into a showpiece to rival San Antonio’s Riverwalk.

Sushi joints started opening up. Reiki masters moved to town. Stockton started to turn, well, Californian.

If only it could have lasted.

At the February 28 city council meeting, which ran for more than six hours, Mayor Ann Johnston started the proceedings by saying, “Lord, please help us.”

A beat.

“Lord, we need your help.”

The farmers prayed too:

One of the unique residents of these delta waters is the delta smelt, a three inch minnow type fish. “It fits in the palm of your hand and it’s found only in California,” explains Brandon Middleton, an attorney with the Pacific Justice Foundation. “A couple of years ago environmental groups came in and they argued, with success, that the government agencies were not doing an adequate job in terms of considering the effects that the pumping operations had on these species. And so the result of that initial success from environmental groups was a severe set of restrictions that really cut off a lot of water supply for the farmers.”

“As result of those lawsuits,” says Joe Del Bosque, “our water was choked off and in 2009 we only received 10 percent of our normal water deliveries…. I left idle over 900 acres that would have been cantaloupes, tomatoes, wheat and so forth, and so it was a very devastating year for us.”…

The impact of these government regulations on Fresno County farmers has been dramatic. Phil Larson says, “Right now the unemployment on the west side [of the county] is running 35.6. It was 41.8 two years ago, so it really hasn’t changed a whole lot. The unemployment in the city of Fresno right now is 15.8 percent.”…

The problem says Pastor Franklin is that “we are dependant upon the irrigation system which is controlled then by the government. If they don’t let the water flow, crops don’t grow and people don’t work.” Franklin says the government officials in Sacramento and Washington D.C. who are responsible “are looking at a small fish that they’re trying to save. In reality that fish is blocking the livelihood of literally hundreds of thousands of people here in this valley… stopping them from working.”…

Giving the farmers of the San Joaquin Valley more water to grow their vegetables certainly makes a lot of sense from a number of standpoints. But as Pastor Franklin observes, “Elijah prayed to God for rain. Well, God hears our prayers; unfortunately Sacramento doesn’t.”

All those city employees with their lifetime benefits for themselves and one other person, with no requirement for time worked – how many of them cared about the farmers growing the veggies for most of the United States? Between the EPA, the State of California and management of the Delta area, which includes Stockton, the whole area is a disaster.

Related and Background:

California Central Valley Delta Smelt: Judge Trounces Obama Admin: artibrary capricious and unlawful

  • Seipherd

    The solution to this sort of nonsense should be simple for the Californuts that love to tax things — tax those with defined benefit pensions what the pension can’t pay on it’s own. If the pension payout is supposed to be $5k, but the pension fund only has $1K, giv’em the $5k, after deducting a 4K ‘pension’ tax. Offer folks still ‘paying’ an out if they convert to a market sensitive defnined contribution pension on a prorated basis — and watch taxes and regulations start to ease as they quickly start to figure out low taxes and regulations are in their pension’s best interests.

    • Seipherd, easy – never happen! We’re talking about unions here. Great idea though.

  • OldmanRick

    The real solution is to weight the value of the fish against the economic value of the area. Gee, that was easy. Turn the irrigation back on. Then again I value human life and economic vitality more than some non productive smelt. BTW, if memory serves, it does seem that the smelt were doing just fine back when the irrigation was turned on before the tree and bunny huggers came onto the scene.

    • OldmanRick, the whole thing was stupid and the fact that it has gone on for so long in such an important area indicates that America will never be the same. I feel so badly for those farmers.