It's been just over a week since Detroit became the largest city in American history to file for bankruptcy protection under Chapter 9.
Until now, that unwanted distinction belonged to Stockton, California.
Earlier this year, Bridge Magazine writer Ron French wrote an article about his visit to bankrupt Stockton and Vallejo, a California town that has emerged from bankruptcy.
As Ron puts it, if Stockton is an example of a city just being diagnosed with fiscal "cancer," Vallejo is a community that has finished chemotherapy. And so far nobody seems particularly thrilled with the results.
Ron French joined us today.
According to French, Detroit, Stockton, and Vallejo have a lot in common. For example, all were very generous to city employees.
“What you had were very generous benefits in both Stockton and Vallejo for city employees that ended up being unsustainable once the housing market collapsed. And in these cities the housing values, a lot like in Detroit, dropped between 50 and 70%,” he said. “So your property taxes take a nose dive, and suddenly there’s no way to pay the pensions and pay the health care and pay the salaries that you’re offering to the city employees.”
In Stockton, a loophole allowed for some city employees to get paid more in retirement than they did while working.
In both California cities, crime has become a major problem as a result of the bankruptcy. In Vallejo, police stopped responding to burglaries and citizens had to form neighborhood watches to try to make up for it.
“The city manager of Vallejo said if he had any piece of advice for Detroit, it's that if you declare bankruptcy, don’t be timid about it,” said French. “If you’re going to rip the bandage off, do it quickly and cut even more than you think you need to.”
French said that Kevyn Orr’s goal of getting city services up to an acceptable level is incompatible with the bankruptcy.
“It’s a very tough process. Vallejo said if there’s any way to avoid it, don’t do it. Obviously, Kevyn Orr chose to feel that there isn’t a way to avoid it,” he said. “As far as getting city services increased at the same time that you’re trying to cut all this, I think it’s going to be tough if you use Vallejo and Stockton as an example.”
According to French, no one in Stockton or Vallejo had anything positive or encouraging to say about bankruptcy.
-Michelle Nelson, Michigan Radio Newsroom
Listen to the full interview above.
