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City Weighs Concern Over Chapter 9

POSTED July 3, 2012 11:04 p.m.

As local leaders watch the financial troubles of neighboring Stockton, many wonder if other cities in the region, such as Oakdale, are at the same risk for filing bankruptcy.

On June 28, Stockton, California became the largest U.S. city to seek protection from its creditors after its city council gave the go-ahead with a budget based on the city filing for bankruptcy seeking Chapter 9 protections.

“Oakdale and Stockton are similar for a variety of different reasons,” said Oakdale Interim City Manager Stan Feathers.

“We are both located in the Central Valley where we have a housing meltdown, the state has hurt us by taking our redevelopment money, and we are also similar to Stockton because we have not funded for our liabilities.”

In the 2000s when the housing market was high, Stockton had grand visions for its downtown area and renovated its waterfront, built a new arena and stadium, built parking garages, and leased modern office buildings for city use.

Since tax revenues were flowing in, Stockton took out exorbitant bonds and loans to finance its projects.

During the same period, Oakdale took similar measures, but on a smaller scale, building the Bianchi Community Center and purchasing the Hershey’s Visitor Center for city use with redevelopment funds. It also took out a bond to upgrade its wastewater treatment facility.

“We should have used that money to fix streets and develop East and West F Street,” said Mayor Pat Paul. “There should have been retail centers built at those locations to generate sales tax. We have to stop the (shopping purchase) leakage to Riverbank.”

Former Mayor and councilman during that period, Farrell Jackson, defended Oakdale’s actions stating it was a different time then, reserves had been built up to over $5 million, and the city had a fully-functioning redevelopment agency.

“Hindsight is always 20/20 and you can always Monday morning quarterback decisions,” said Jackson. “There was a lot of money spent on several roads. Just look at F Street and Yosemite (Avenue).”

Jackson also said he pushed for the F Street corridor to be developed and the annexation of 460 acres for industrial redevelopment.

“To let Blue Diamond escape the way we did was a disaster,” said Jackson. “That would have brought a number of jobs to the city.”

In regard to the Hershey Visitor Center, Jackson pointed out that three of the four current council members were part of the decision to purchase the property and added it would have been lost to the state when it took redevelopment agency funds without a chance to recover any money by selling it now if the city chooses.

With Stanislaus County’s unemployment rate at 17 percent, foreclosures continue and buying power drops. Property values fell again for 2012-13 and the figure means lower taxes for homeowners with slightly less revenue for local governments.

“We still basically have more expenditures than we do on revenues,” said Feathers. “The citizens stepped up and passed the sales tax measure to help us get (through) the next three years. Without that, our expenditures would far outweigh what we get in revenue.”

Paul said Oakdale could have found itself in the same situation as Stockton had they not made some changes and serious analysis earlier this year she credits on behalf of Former Interim City Manager Greg Wellman, Feathers, and Operations Manager Dee Tatum.

“Stockton had signals ignored and chose to still go forward,” Paul said. “We were on the same disastrous path but started to pay attention. Oakdale has a real balanced budget this year without any smoke or mirrors.”

Feathers indicated that “bankruptcy” has been alluded to in consideration of Oakdale’s long-term issues.

“We’re nowhere near there and can’t let Oakdale get to where Stockton is now,” said Feathers, but warned they have to keep a close eye on the budget issues. “Without taking steps to resolve financial issues and bring expenditures in line with revenues, it still remains a concern.”

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