City Journal Autumn 2014

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Autumn 2014
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California

Steven Greenhut
Broken Windows, Broken City
Stockton faces pending insolvency and an unraveling social fabric.
6 March 2012

Where’s a good Occupy protest when you need one? Those scraggly protesters are making mischief on behalf of “the 99 percent” in Oakland, and they’re raging against university tuition increases in San Diego, Los Angeles, and Santa Cruz. Yet as a municipal crisis unfolds in one of California’s former boomtowns, “Occupy Stockton” is nowhere to be found. If the movement cared about ordinary people as much as it claims, it would have plenty to keep it busy in Stockton, where the greed and shortsightedness of the public sector have sent a relatively poor city careening toward insolvency and unraveled its social fabric.

Because California’s municipalities have squandered so much of their budgets on government workers and retired employees, they haven’t been able to provide the essential services that justify government’s existence. Stockton is a case in point. Bob Deis, who took over as city manager in 2010, told reporters recently that the city’s finances resembled a Ponzi scheme. He had never seen the kind of unaffordable health plan that Stockton employees receive: complete medical care for the employee and spouse for life, available, in some rare circumstances, after only a month on the job. “Employee costs are weighing down the city in the wake of a recessionary slump in revenues,” City Journal’s Steve Malanga observed last week. “Stockton has spent the last two years trying to reduce its budget to avoid insolvency. The city has cut about a quarter of its police, but rich pension and health benefit deals still make it difficult for the city to pay its bills. . . . Employee costs make up 81 percent of the city’s general fund spending.”

Stockton has taken out pension-obligation bonds and followed other California cities in squandering tens of millions of tax dollars on redevelopment projects—in its case, a new minor-league baseball stadium and a waterfront entertainment project—that it hopes will bring an urban renewal. Yet downtown Stockton, despite its beautiful old buildings dating to the Gold Rush era, is largely a ghost town. An ineffective government, which can’t control crime or even keep the streets clean, is the main source of the problem.

Stockton is the first city to operate under a new California law designed to put the brakes on bankruptcy. Under the law, the city will stop paying some of its debts and is heading toward a 90-day mediation process, now a requirement before seeking Chapter 9 bankruptcy protection. The state legislature passed the new law at the urging of public-employee unions after Vallejo declared bankruptcy in 2008. Unions feared that California municipalities would use bankruptcy protection to abrogate their labor contracts. Both Vallejo and Stockton are suffering under crime waves as police staffing is reduced, but public safety officials share the blame for the city’s budget disaster. Their salaries and defined-benefit retirements still allow them to retire with 90 percent or more of their final year’s pay. Stockton has lost more than 41 police officers over the past three years. But the city participates in the generous “3 percent at 50” retirement benefit, a formula that allows public safety workers to retire at age 50 with 3 percent of their final year’s salary multiplied by the number of years on the job. Vallejo made headlines for providing a $300,000 compensation package to a police captain. Stockton has double the number of $100,000-plus retirees found in similar-sized cities.

Only a few years ago, Stockton was thriving. Long-distance commuters who couldn’t afford the Bay Area’s sky-high housing prices crossed the Altamont Pass into the Central Valley. Housing prices soared throughout the region. Like most inland California cities, Stockton lacks coastal glamor. But it’s a decent working-class city with historic homes, leafy neighborhoods, a fine private university with an ivy-covered campus (University of the Pacific), and modern suburbs, though it did have its run-down neighborhoods.

Today, though, the city is starting to epitomize the “broken windows” problem that City Journal readers understand so well. Residents share a widespread sense that the city doesn’t respond to problems or do a good job handling basic services. I own two rental houses in Stockton, which I purchased as foreclosures after they lost about 75 percent of their value from the market peak. Overgrown trees entangled with utility wires stand in front of one of my houses. It’s the city’s legal responsibility to provide maintenance for such things, but officials told me they have no plans—let alone a budget—to do so. I see shopping carts abandoned in neighborhoods and trash-strewn parks. When my houses were vacant, preventing break-ins by homeless squatters and copper-pipe thieves was a constant struggle. I like Stockton—its neighborhoods, its climate, its terrain (on the edge of the magnificent California Delta), and its proximity to the big cities across the coastal ranges—but the civic disorder takes a heavy toll.

When private firms don’t provide good services, consumers have choices. When city governments fail to perform adequately because they have squandered their budgets, residents are left waiting, hoping, and eventually moving. As an elected supervisor in another beleaguered California county once opined: “County government is becoming a pension provider that provides government services on the side.” That’s true practically everywhere in the once Golden State. In Stockton, the results are plain to see.

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