The news coming out of Stockton that local leaders are considering taking drastic steps to bring its fiscal house in order should offer a warning to the citizens of Sacramento. The capital city, like Stockton, is also projecting multi-million dollars budget shortfalls for at least the next few years. Both cities have been on the losing end of the housing market collapse. Both cities have laid off police officers. Stockton is now considering reducing its firefighting staff, a move Sacramento has flirted with and in some ways has already enacted via the “browning-out” of stations.
Something else that should give residents of Sacramento pause is Stockton’s over-zealous development of its waterfront district; a plan that was heralded as part of the solution to secure Stockton’s future economic prosperity. The public contributed $127 million towards the construction of an events center, arena, baseball park, and a waterfront hotel. The public contribution of that project stretched the financial limits of the city, and their city council is now considering bankruptcy as the road out of their money mess.
Moody’s Investors Services lowered the credit rating for the city Stockton just last week. That move could affect the interest rates Stockton gets for its bond debt, meaning it will cost the city even more to get out of its hole. The city of Sacramento currently has to borrow money and transfer cash from different accounts during the fiscal year just to cover liquidity gaps. Earlier this month, the city treasurer introduced a motion to the council to move cash around various departments just to keep the city out of the red.
As the mayor and councilmembers prepare to vote on an arena deal that could tie up revenues for the next 50 years, they would be prudent to ensure that Sacramento’s fate doesn’t mirror that of Stockton’s.