Liz Farmer is a GOVERNING finance writer.E-mail: firstname.lastname@example.org
Insurers holding $161 million of Stockton, Calif.’s debt and who want for the city’s case thrown out of court said this week the city didn’t pursue cost-cutting measures before filing for bankruptcy protection, according to a report by the Dow Jones Daily Bankruptcy Review.
"The city left millions of dollars on the table in terms of additional budget efficiencies and revenue enhancements that could be achieved outside of bankruptcy without jeopardizing public safety," Assured Guaranty attorneys told Judge Christopher Klein, according to the Review. Attorneys added that Stockton also did not opt to raise taxes on its roughly 300,000 residents.
A municipal finance expert for Assured found the city’s leaders failed to "establish a culture of frugality." That expert, according a 76-page report filed in the U.S. Bankruptcy Court in Sacramento, concluded the city could have cut $24 million in expenses and increased its revenue by $9.5 million in its roughly $150 million budget.
Specifically, expert, Nancy Zielke of consulting firm Alvarez & Marsal, suggested selling buildings like Stockton's City Hall, the Bob Hope Theatre and the Stockton Events Center and raising taxes on utilities, tourists and on emergency 911 callers.
Connie Cochran, a spokeswoman for Stockton, told the Review she would not “argue this in the media.” She added city leaders "will need time to fully evaluate and assess the objections contained in" Assured Guaranty's complaint.
Stockton filed for Chapter 9 bankruptcy protection on June 28, becoming the largest municipality to do so. The city blamed the real estate crash and inflated pensions for its downfall. According to the Review, city leaders said they made cuts that saved $90 million annually and took nearly one-quarter of its police officers off the streets, but still faced a $26 million shortfall.