Menus Subscribe Search

Follow us


(PHOTO: INMAN NEWS)

(PHOTO: INMAN NEWS)

Cities are (Still) Dropping Like Flies

• November 28, 2012 • 4:00 AM

(PHOTO: INMAN NEWS)

Local governments just can’t get a break. Stockton, California, is case in point.

Cities are dropping like flies. In the last several months, a string of municipal governments in states from Alabama to Rhode Island have filed for bankruptcy. Even more are likely to follow within the next year as cities reel from an end to federal stimulus dollars.

What’s going on with local governments? Their troubles stem from multiple sources, but the critical factor is, yes, after all this time, still the housing bust. City finances are almost exclusively tied to property tax revenue—indeed, most locales have no other funding source. Despite all the focus on mismanagement and bloated pensions, few cities would be in these severe dire straits had housing prices not fallen by roughly 41 percent or even greater, in some places.

Stockton, California, the largest city (population: 291,707) to go bankrupt so far, has been referred to as “ground zero” for the local-government financial crisis. Like the rest of the more than 87,000 local governments in the U.S., Stockton is struggling to meet ever-growing obligations in health, security, and infrastructure, as the responsibility for many services has shifted from federal to state, and state to local. In some small but vital ways, however, Stockton is luckier than many of the other places facing severe fiscal shortfalls.

A few years ago, Stockton’s future looked bright. As commuters from the San Francisco Bay Area bought homes in less-expensive Stockton, the population boomed and new businesses blossomed. Home prices tripled from 1990 to 2007, reaching a median of more than $400,000. The city was able to use rising tax revenues to leverage investments in long-ignored and dilapidated areas; infrastructure was built to attract still more businesses; and the city undertook a huge environmental cleanup of the port.

Today, the story is very different.

Post-bust, the median home price is close to $150,000. Stockton has topped the national foreclosure index; as of last January, one in every 140 houses was in foreclosure, and the city’s unemployment rate has hovered between 17 and 20 percent. In 2011, Forbes magazine dubbed Stockton the “most miserable” city—a painful kick for a place already down. With its tax base decimated, no means for Keynesian short-term deficit spending to promote recovery, the City Council was forced to declare bankruptcy in June. “The bad news just continues to come and has been coming for four years,” Stockton Mayor Ann Johnston told me.

Johnston came to office at the beginning of 2008. Initially, she was concerned that the city had reached levels of spending during the boom years that would be unsustainable if the economy slowed even moderately, but what transpired almost immediately was far worse.

In debt to creditors for bonds issued for redevelopment and infrastructure projects, and bound by contracts with their city workers, legislators had to act fast. The mayor and City Council—80 percent of whom were newly elected—ended almost all city-funded economic development projects and cut services. Then they had to make further cuts. The police department got so slim that residents complained that they couldn’t get an officer to respond unless there was “blood involved.” The city tried to negotiate with creditors to create a repayment plan, but they couldn’t reach agreement.

Although Stockton is considered the poster-city for local-government fiscal disaster, it is likely to escape its economic predicament far more quickly than others. Perhaps most importantly, it possesses some tools not always available to other cities—like a grant writer. As the result of one federal grant, the city is hiring up to 17 additional police officers this year, while other grants—primarily from the federal government—have paid for large investments in highway and other transportation infrastructure development.

Of course, a grant writer can only work her magic if there are grants to be had. Mayor Johnston was clear about the necessity of those federal government monies. “We will really struggle if the feds cut any more from their aid to communities. We count on those dollars. If we don’t get COPS money, our crime rate will skyrocket.” COPS is the U.S. Department of Justice’s competitive grants program to help support community policing strategies and hire police officers; Stockton has done well in applying and receiving these kinds of grants. But research, such as that by the Ohio State University’s Linda Lobao and David Kraybill, has found that most counties—and we can assume that this also holds true for most local governments—do not have a grant writer on staff.

California is also—surprise!—different from other states in a few ways. Proposition 13, the referendum that rolled back and froze property taxes and required any attempt to increase taxes in California to require a two-thirds majority in the state legislature, forced education financing from the local governments to the state. Had it not, Stockton’s schools would be on the chopping block, as they are in every other struggling city and county.

Furthermore, in California, cities don’t just levy a property tax; they also receive a portion of the state sales and use tax, a revenue stream not as diminished by the recession. In a shrewd move, Stockton passed a law many years ago that allocates one-quarter of its sales tax to transportation funding. Federal grants often require that the local governments have matching funds, and Stockton’s allocation law gives it a reserve with which to match federal transportation dollars. This tool alone means that its investment in economic growth will far outpace that of many other cities across the country that are, ironically, too poor even to be eligible for such matching grants.

Stockton’s Mayor Johnston is an ever-hopeful politician—focusing on what her city has to offer, how much potential it has, and how hard the current administration is working. But even as California has helped in the aforementioned ways, they bear some responsibility for Stockton’s mess. “The state has been our worst enemy,” Johnston told me.

For example, Gov. Jerry Brown signed a bill to send more criminal offenders to local jails instead of state prisons, transferring the cost of imprisonment to cities and counties. According to Johnston, because Stockton does not have the money or the space to take care of inmates, they often are forced to release felons back to the streets. This isn’t uncommon: Lobao and Kraybill found, in 2001 and 2004, that more than 60 percent of counties reported that mandated costs from either the state or federal government had created major budget problems.

It seems that if they can get its bankruptcy worked out, Stockton may recover fairly quickly as a result of its unusual financial resources, but most other local governments are headed for a longer struggle. As states transfer more costs to the local governments as part of state budget balancing, cities and other local governments are forced to make cuts to essential programs, and it is the cities that need their quality police, educational institutions, and health centers most that are the least likely to get help from the private market or government grants. Instead, as a result of shortsighted passing of the buck and fiscal constraints, these cities and local governments will drag our economy down for years to come.

Shanna Pearson
Shanna Pearson-Merkowitz is an assistant professor at the University of Rhode Island. Her academic work is published in some of the top political science journals including the Journal of Politics, the American Journal of Political Science, and State Politics and Policy Quarterly. Prior to entering academia, she worked in state and local government and electoral campaigns.

More From Shanna Pearson

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

November 21 • 4:00 PM

Why Are America’s Poorest Toddlers Being Over-Prescribed ADHD Drugs?

Against all medical guidelines, children who are two and three years old are getting diagnosed with ADHD and treated with Adderall and other stimulants. It may be shocking, but it’s perfectly legal.



November 21 • 2:00 PM

The Best Moms Let Mess Happen

That’s the message of a Bounty commercial that reminds this sociologist of Sharon Hays’ work on “the ideology of intensive motherhood.”


November 21 • 12:00 PM

Eating Disorders Are Not Just for Women

Men, like women, are affected by our cultural preoccupation with thinness. And refusing to recognize that only makes things worse.


November 21 • 10:00 AM

Queens of the South

Inside Asheville, North Carolina’s 7th annual Miss Gay Latina pageant.


November 21 • 9:12 AM

‘Shirtstorm’ and Sexism in Science

Following the recent T-shirt controversy, it’s clear that sexism in science persists. But the forces driving the gender gap are still being debated.


November 21 • 8:00 AM

What Makes a Film Successful in 2014?

Domestic box office earnings are no longer a reliable metric.



November 21 • 6:00 AM

What Makes a City Unhappy?

According to the National Bureau of Economic Research, Dana McMahan splits time between two of the country’s unhappiest cities. She set out to explore the causes of the happiness deficits.


November 21 • 5:04 AM

Sufferers of Social Anxiety Disorder, Your Friends Like You

The first study of friends’ perceptions suggest they know something’s off with their pals but like them just the same.


November 21 • 4:00 AM

In 2001 Study, Black Celebrities Judged Harshly in Rape Cases

When accused of rape, black celebrities were viewed more negatively than non-celebrities. The opposite was true of whites.


November 20 • 4:00 PM

Women, Kink, and Sex Addiction: It’s Not Like the Movies

The popular view is that if a woman is into BDSM she’s probably a sex addict, and vice versa. In fact, most kinky women are perfectly happy—and possibly healthier than their vanilla counterparts.


November 20 • 2:00 PM

A Majority of Middle-Class Black Children Will Be Poorer as Adults

The disturbing findings of a new study.


November 20 • 12:00 PM

Standing Up for My Group by Kicking Yours

Members of a minority ethnic group are less likely to express support for gay equality if they believe their own group suffers from discrimination.


November 20 • 10:00 AM

For Juvenile Records, It’s ‘Justice by Geography’

A new study finds an inconsistent patchwork of policies across states for how juvenile records are sealed and expunged.


November 20 • 8:00 AM

Surviving the Secret Childhood Trauma of a Parent’s Drug Addiction

As a young girl, Alana Levinson struggled with the shame of her father’s substance abuse. But when she looked more deeply into the research on children of drug-addicted parents, she realized society’s “conspiracy of silence” was keeping her—and possibly millions of others—from adequately dealing with the experience.



November 20 • 6:00 AM

Extreme Weather, Caused by Climate Change, Is Here. Can Nike Prepare You?

Following the approach we often see from companies marketing products before big storms, Nike focuses on climate change science in the promotion of its latest line of base-layer apparel. Is it a sign that more Americans are taking climate change seriously? Don’t get your hopes up.


November 20 • 5:00 AM

How Old Brains Learn New Tricks

A new study shows that the neural plasticity needed for learning doesn’t vanish as we age—it just moves.


November 20 • 4:00 AM

The FBI’s Dangerous Misrepresentation of Encryption Law

The FBI no more deserves a direct line to your data than it deserves to intercept your mail at the post office. But it doesn’t want you to know that.


November 20 • 2:00 AM

Brain Drain Is Economic Development

It may be hard to see unless you shift your focus from places to people, but both destination and source can benefit from “brain drain.”


November 19 • 9:00 PM

Gays Rights Are Great, but Ixnay on the PDAs

New research suggests both heterosexuals and gay men are uncomfortable with public same-sex kissing.


November 19 • 4:00 PM

The Red Cross’ Own Employees Doubt the Charity’s Ethics

Survey results obtained by ProPublica also show a crisis of trust in the charity’s senior leadership.



November 19 • 2:00 PM

Egg Freezing Isn’t the Feminist Issue You Think It Is

New benefits being offered by Apple and Facebook probably aren’t about discouraging women from becoming mothers at a “natural” age.


Follow us


Sufferers of Social Anxiety Disorder, Your Friends Like You

The first study of friends' perceptions suggest they know something's off with their pals but like them just the same.

Standing Up for My Group by Kicking Yours

Members of a minority ethnic group are less likely to express support for gay equality if they believe their own group suffers from discrimination.

How Old Brains Learn New Tricks

A new study shows that the neural plasticity needed for learning doesn't vanish as we age—it just moves.

Ethnic Diversity Deflates Market Bubbles

But it's not in the rainbow and sing-along way you'd hope for. We just don't trust outsiders' judgments.

Online Brain Exercises Are Probably Useless

Even under the guidance of a specialist trainer, computer-based brain exercises have only modest benefits, a new analysis shows.

The Big One

One company, Comcast, will control up to 40 percent of Internet service coverage in the U.S., and 19 of the top 20 cable markets, if a proposed merger with Time Warner Cable is approved by regulators. November/December 2014

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.