This week marks the 10th anniversary of the collapse of Bear Stearns, one of the high-flying Wall Street outfits that went bust on subprime mortgages at the onset of The Great Recession.
The Great Recession withered Stockton into Ground Zero for foreclosures. It pitched the city into bankruptcy. It changed city politics and policy in ways still being felt.
“This is the most difficult and heart-wrenching decision that we have ever been faced with,” Mayor Ann Johnston said in June 2012 of the decision to file for bankruptcy.
Up to that point, city politics were characterized by City Hall’s coziness with public employees, developers and business elites. Those groups all retain influence, of course, but bankruptcy broke their stranglehold.
The fiscal crisis also angered citizens into voting out chastened, reformist incumbents — and to voting in Anthony Silva as mayor, 2012-16.
That “absolutely changed things,” said Jeff Acquistapace, a political consultant with 3AM Communications.
“It felt like Silva gave a voice to people who felt they had never had a voice in politics before,” Acquistapace said. The problem is he would say anything to feed their fear. “So there’s absolutely no trust in the people who are trying to make difference.”
Silva faces felony charges of embezzlement and money laundering. Yet a grass-roots group has launched a recall against his successor, Mayor Michael Tubbs.
It’s a national thing, too, said Steve Reid, of Reid and Associates, another political consultancy.
“I think people are more skeptical all the way around, from the presidency on all the way down,” Reid said. “There is less trust in elected officials than there used to be.”
Financially, before bankruptcy, city leaders were bullish to the point of magical thinking. They OK'd every expenditure, spent every reserve dollar, conscienced every debt.
An institutional nearsightedness prevented leaders from looking long term — until the recession dried cash flow and the city blasted a Chicxulub-sized crater.
A federal bankruptcy judge approved a Long-Range Financial Plan. It guides the city today.
But the mindset has changed, too, said City Manager Kurt Wilson.
“I think the bankruptcy made it real: bad things can really happen if we don’t make right decisions,” Wilson said.
“Right things” such as, “Staff telling Council they can’t have whatever that item is. The Council telling the citizens they can’t have those items.” The hard decisions, Wilson said.
The city today boasts $62 million in reserves, even after putting aside $25 million for a new City Hall. Cost of Living Adjustments — once-lavish automatic public employee raises — are budgeted at 2 percent, with exceptions for police. The city squirreled away $18 million in a pension trust.
Still, fiscal watchdog Dean Andal gave the city a mixed review.
“The city deserves credit for not spending all of that,” Andal said. “It’s very hard for politicians not to spend every single dime they have in their coffers. The downside is that was not accomplished through frugality. That was accomplished by very large tax increases.”
On downtown, Jerry Brown’s budget-cutting elimination of Redevelopment Agencies may paradoxically have unleashed what urbanist Jane Jacobs called “the creativity of ordinary people.” Numerous entrepreneurs are opening small businesses in long-vacant buildings.
Not only police staffing is up — to 451 from a nadir of around 320 — so is morale, said Stockton Police Chief Eric Jones.
“The relationship with police administration and with staff and with the city in general, with the community, I just feel higher levels of feeling of appreciated,” Jones said. “It’s not all money. It’s feeling appreciated, having that worth and identity, having that mission.”
What hasn’t recovered, to circle back, is the housing market. Only now is one firm building. Others have projects in the pipeline. But too slow for demand, creating an affordability crisis.
“The challenge is growing in a way that doesn’t create new long-term financial burdens that we can’t afford,” Tubbs said.
Meanwhile in Washington, Congress is considering undoing the Dodd-Frank Act, the 2010 banking regulations designed to prevent another crash. As if Stockton needs another painful lesson.
Contact columnist Michael Fitzgerald at (209) 546-8270 or firstname.lastname@example.org. Follow him at recordnet.com/fitzgeraldblog and on Twitter @Stocktonopolis.