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California Common Sense executive director Autumn Carter explains how the city went bankrupt.
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-- to Rhode Island cities across the US are teetering on the edge of bankruptcy weighed down by billions of dollars in obligations.
They simply can't afford the city of Stockton California could be next in line with some of the most generous benefits granted to public workers in the state.
The second highest foreclosure rate in the nation.
And what some have called sheer incompetence and City Hall Stockton California could become the country's largest city to fall -- the chapter nine.
Here to explain why is Stockton.
Yeah and -- cent thanks so much for coming on tonight we really appreciate your help.
-- understand here because I know you've said that that the city has hit a wall what happens.
Well what happened was we went -- union contracts that were unsustainable.
That we have given benefits to employees -- we cannot finance.
The bond market being overextended ourselves and bonds.
And the state raided a bunch of our funds here in California at the Great Recession -- us it was a perfect storm the -- sounds awful you know.
What we we heard it dale friction -- a Stockton City Council member had this to say there were horrible decisions made.
City leaders spent money faster than -- was coming in thinking that the gravy train would never go away.
So beyond and -- the problems that you face.
I am hearing that there was bad management of Stockton do you agree with that.
Well I think this situation -- is the accumulation of a lot of dis a decisions made.
Over the last twenty years and so.
There is obviously people who who are part of that at a variety of people and so.
We really can't point to any one person or entity but.
Again a whole number of different situations.
Presented themselves -- people made decisions based upon the best information they had at the tide and and and dale is right we spent like we there was no tomorrow during the housing boom days right I remember those pictures of Stockton.
California during the -- It was just kill after kill of new home development.
Brand spanking new -- is clearly there was overbuilding with that where the money -- Cayman.
Yes that's for the money -- -- man.
And -- city leaders at that time felt.
That this -- is this economy was going to continue.
And therefore they they built a newer -- a new ballpark.
A lot of civic improvements based upon.
The belief that the revenues the taxes would continue to -- in indefinitely and of course we know in the nation and in California that's not the case.
And now look at these deficits six point six million in your fiscal year 201020118.
Point seven the following year.
It goes on in on if you see this red ink just flowing.
What can you do to turn the situation around I mean I know -- -- trying to negotiate with the unions there there's -- every effort made -- -- it.
Right they share up but does somebody have to come in and bail you out what.
Can happen.
Well right now we're engaged in a process called the 506.
AB 506.
Which is a state law that requires.
Any California city that might go into.
We're in the middle -- tried to get our unions.
To come to the table and talk about a solution to avoid that insolvency.
How long you have for that.
Well we have sixty days it can be extended to nine.
Or longer if all the parties agree the whole goal is to avoid insolvency the whole goal is to make -- whole.
Add to set a good foundation in our in our fiscal house once again.
Yeah.
I know you're going through mediation in this is -- an effort to pull back from the brink but if -- did haven't to do all over again.
What should Stockton have done differently.
Well Stockton should have done what a lot of people in this nation should have done.
Many years ago was put some savings the way have a good healthy reserve.
Really do actuarial studies about what things like retiree health would cost in the future.
They will they should have been -- conservative and prudent in how they manage their debt.
Again there are lots of decisions that could -- been made and you know hindsight is always better than fourth side and so.
We could have done things much differently and not been in the situation in which we are today.
I think a lot of city managers a lot of mayors lot of City Council people across the country.
Our thinking about the same issues today merit thank you so much for coming on the show and I we really appreciate it.
You're welcome thank you Jerry.
