Politics & Policy

The Tales of Three Bankrupt Cities

City hall building in Stockton, Calif.
Detroit suffered from different ailments than did Stockton and San Bernardino.

In the industrial midwest, the city government of Detroit went into bankruptcy in July. Out in California, the city governments of Stockton and San Bernardino entered bankruptcy proceedings in 2012. But the Detroit and California bankruptcies, like Tolstoy’s unhappy families, are not alike. They suffer from quite different ailments.

You can see the difference by comparing their populations in the 1950 and 2010 censuses. In 1950, Detroit – then the nation’s fifth-largest city – had 1,849,568 people. In 2010, it had 713,777.

Stockton and San Bernardino were not much more than small towns in 1950, with 70,853 and 63,058, respectively. Their total population of 133,911 was only 7 percent the size of Detroit’s. It’s different now. In 2010 Stockton had 291,707 people, and San Bernardino 209,924, for a combined total of 501,631. That number is 70 percent of the 2010 total of Detroit. Lots of people moved out of Detroit. Lots of people moved into Stockton and San Bernardino. These numbers are clues to these cities’ different roads to bankruptcy. Or put it another way. Many people who pay taxes moved out of Detroit. Many people who don’t pay much in the way of taxes moved into Stockton and San Bernardino.

Why did so many people move out of Detroit? The quick answer: crime abetted by welfare. During the decade from 1965 to 1975, crime and welfare dependency roughly tripled in the United States and rose even more in Detroit. There was a connection between the two trends. Welfare encouraged single parenthood; fatherless boys often grew up to commit violent crimes.

#ad#Most violent crimes were and are committed by (and against) blacks, whose numbers in Detroit during the great northward migration rose from 149,000 in 1940 to 660,000 in 1970. Crime was especially common in Detroit during the 20-year reign of Mayor Coleman Young, who was first elected in 1973 and served 20 years. Young was smart, charming, and inclined to blame the city’s problems on fleeing whites. He stopped tough policing tactics like stop-and-frisk and concentrated on bringing in federal dollars and sponsoring big projects like the downtown Renaissance Center and General Motors’ Poletown plant.

But the Detroit Three auto companies were losing market share to foreign competitors, who prudently avoided locating plants anywhere near Detroit. The city’s non-black population dropped from 853,000 in 1970 to 250,000 in 1990. Then white flight was followed by black flight, with the black population dropping from 777,000 in 1990 to 590,000 in 2010.

Crime drove away Detroit’s taxpayers. Much residential and commercial property is literally worthless. The Detroit News found that 47 percent of property owners didn’t pay property taxes in 2011. The city workforce is not huge (9,700), and its pensions are not lavish (average: $19,000). But the city lacks a tax base sufficient to pay for services for 713,777 people over 139 square miles.

Stockton and San Bernardino are different. They are typical of midsize California cities that were never upscale and have been filling up with immigrants — many of them illegal, primarily from Mexico. Stockton is 40 percent Hispanic; San Bernardino, 60 percent.

Public-employee unions, legalized by Jerry Brown in his first stint as governor nearly 40 years ago, are strong in California, and in these two cities THEY succeeded in getting lavish salaries, health plans, and pensions before the housing bust (as they did in Vallejo, Calif., which went bankrupt in 2008). Police and fire unions were especially demanding. You have to meet the competition of richer neighboring cities or lose your public-safety officials, they threatened.

After all, housing prices were always going to rise, and federal policies and Fannie Mae encouraged huge mortgages for Hispanics. So the property tax base would always keep rising. What could go wrong?

The 2007–10 foreclosure rates in the Central Valley (Stockton) and the Inland Empire (San Bernardino) were among the nation’s highest. I suspect that half the dispossessed homeowners were Hispanic.

These two cities had other problems. Stockton spent $1 billion on downtown and waterfront infrastructure that has been a bust. San Bernardino officials reportedly falsified documents on pension costs.

Economic downturns expose weaknesses and mistakes that are ignored in more prosperous times. Detroit is in bankruptcy primarily because crime drove out the city’s tax base. The California cities are there primarily because of overbearing public-employee unions.

They probably won’t be the last cities to go bankrupt for these reasons.

Michael Barone is senior political analyst for the Washington Examiner. © 2013 The Washington Examiner. Distributed by Creators.com

Michael Barone — Michael Barone is a senior political analyst for the Washington Examiner, resident fellow at the American Enterprise Institute, and longtime co-author of The Almanac of American Politics. © 2018 Creators.com

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