Bankrupt Detroit gets federal “bailout” while bankrupt Stockton gets nothing

Today, the Obama administration triumphantly announced $320 million dollars in federal and private funds to support the newly-bankrupt city of Detroit. The administration felt compelled to intervene in Detroit, fast tracking federal grant money to Mo Town, proclaiming that “We’re going to continue to support the efforts under way in Detroit and ensure the federal government is an active partner in supporting the revitalization of the city.”

What about Stockton?

Even though Stockton has been bankrupt for about a year and faces similar if not worse circumstances than Detroit, the Obama Administration apparently doesn’t think we are worth saving.

Detroit is getting $320 million in federal grant money

Detroit recently claimed the mantle of “largest city to go bankrupt” from Stockton, a title held by the city since last year. But the responses to each city’s respective plights have been vastly different. As I wrote in an earlier article, as the economic engine of Michigan, Detroit has been the subject of countless debate at the state level. There were different opinions on what should be done, but everyone agreed Detroit was vital and needed to be saved one way or another.

Unfortunately, Stockton is way down on the pecking order of California cities. Where’s Jerry Brown? He should be up in arms that a bankrupt city in Michigan is receiving preferential treatment while bankrupt California cities gets nothing (not that Brown has helped us before). Instead, Stocktonians are pulling themselves up on their own, while President Obama showers Detroit with millions.

Detroit’s aid should not be considered a bailout since these funds don’t go towards refilling city coffers, but they will kick start economic development. At least some of the assistance going to Detroit may have been awarded through federal grants anyways, but the administration took the time to streamline Detroit’s application process. As a result, $140 million will be awarded for transportation projects (light rail, bus rapid transit) and millions more for public safety. FEMA is even kicking in $25 million for firefighters.

Stockton doesn’t need a bailout, but I think we deserve the same opportunities afforded to other downtrodden cities. Helping Detroit leverage grant money for a recovery while leaving Stockton to fend for itself shows blatant political favoritism and disregard for those who have the bad luck of being poor in Stockton and not Detroit.

It’s not just Detroit that is getting help from the feds, either. Just a few weeks ago, new Transportation Secretary Anthony Foxx parachuted into Fresno to announce a $16 million TIGER grant to revitalize a key downtown corridor. Fresno officials credit assistance from the Obama administration with helping to navigate the bureaucracy and red tape normally associated with federal grants.

This blatant disregard for Stockton is yet another slap in the face from higher powers of government. I was pleased to see Rep. Jerry McNerney’s scathing letter demanding an explanation for Stockton’s exclusion from federal aid. Maybe that will turn some heads at the White House, but I’m not holding my breath.

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Categories: Community Commentary

Author:David A. Garcia

David A. Garcia founded SCL in March of 2012. He holds degrees from UCLA as well as Johns Hopkins University and currently works as the Chief Operating Officer at Ten Space in Downtown Stockton, and previously worked as a researcher/analyst for a congressional agency in Washington DC. The views expressed here are solely of the author.

16 Comments on “Bankrupt Detroit gets federal “bailout” while bankrupt Stockton gets nothing”

  1. September 27, 2013 at 4:27 pm #

    Well, let me say this:

    1. California is a solid blue state so its loyalty to the Democratic party is always assumed.

    2. Michigan was a key state which turned blue in the last election, but its loyalty needs to be earned w/ each new election cycle.

    Stockton’s elite is demonstrably Republican ( kind of “in your face” type of demonstrably). 🙂

    So probably the Detroit aid has more to do with a “thank you” to Michigan for a good show during the last election and a recognition that California is a richer state that could perhaps take care of its own cities.

    BTW, if you need more money for a town of a richer state you better “beat its Republican leadership into unquestionable submission” as strictly defined by the donors. Otherwise, that’s why you have these good Republicans for. To save you before you need saving of any kind. 🙂

    Just a thought. 🙂

    Cheers. (don’t take it seriously – it’s all politics)

  2. David Garcia
    September 27, 2013 at 5:02 pm #

    True, but Detroit is solidly blue, not too many swing votes. It really doesn’t have as much to do with political party as it does with our region having little influence. Also true that Sacramento does next to nothing for the central valley.

    • September 27, 2013 at 6:06 pm #

      o.k. But I heard that Detroit was $18 Bil. in debt and they got $320 in grants.

      So how much debt do we have?

    • September 27, 2013 at 6:17 pm #

      Do we know how much we get in grants from all sources? Fed, state and other?

      Here is some, but is that all? How much we have received for the last 20 years, for example? Does it vary greatly from one year to the next? And how about the port and the county? How many grants ag receives?

      This is only part but has anyone put it all together so that we can see trends and can gauge how much is directed to Stockton vs. our Central Valley cities?

      http://www.stocktongov.com/government/departments/manager/graFedStim.html

  3. Jon Seisa
    September 27, 2013 at 5:14 pm #

    I couldn’t agree with you more, David. The Obama administration is really handling this in a repulsively imbalanced and unscrupulous manner. You just have to wonder why the bias? I suspect more of his political jockeying for the coming elections, and this is merely a PR token.

    In my analysis, decaying and nearly dead Detroit is a lost cause and now a bottomless money pit. Its problems are beyond repairable and are utterly staggering in nature, to say the least. Not even $50 BILLION can fix this mess. No one in their right mind wants to live there with its 80,000 abandoned homes and a total of 50 sq. miles of vacant or derelict lots. The hemorrhaging and shrinking population, businesses and manufacturers have made the city beyond economic sustainability. So what good or use is spending on token little items, on new this or new that, funded by federal dollars? Instead of saving the already dead, the government should be saving those currently on life support before they reach this critical flat-lined state of no return, Detroit. Just board it up, or turn it into some sort of historical museum of ruins. I hate to sound so pessimistic, but unbridled greed of shortsighted unions and Detroit/Michigan politicians created this, their own imploding catastrophe… and what, American Taxpayers are now supposed to reward them for their misguidedness? Of course, par for the course.

    Here is the short list of Herculean tasks that need to be tackled if one thinks they can save dead Detroit… Lots of luck with that…

    1) At this point, the city of Detroit owes money to more than 100,000 creditors.
    2) Detroit is facing $20 billion in debt and unfunded liabilities. That breaks down to more than $25,000 per resident.
    3) Back in 1960, the city of Detroit actually had the highest per-capita income in the entire nation.
    4) In 1950, there were about 296,000 manufacturing jobs in Detroit. Today, there are less than 27,000.
    5) Between December 2000 and December 2010, 48 percent of the manufacturing jobs in the state of Michigan were lost.
    6) There are lots of houses available for sale in Detroit right now for $500 or less.
    7) At this point, there are approximately 78,000 abandoned homes in the city.
    8) About one-third of Detroit’s 140 square miles is either vacant or derelict.
    9) An astounding 47 percent of the residents of the city of Detroit are functionally illiterate.
    10) Less than half of the residents of Detroit over the age of 16 are working at this point.
    11) If you can believe it, 60 percent of all children in the city of Detroit are living in poverty.
    12) Detroit was once the fourth-largest city in the United States, but over the past 60 years the population of Detroit has fallen by 63 percent.
    13) The city of Detroit is now very heavily dependent on the tax revenue it pulls in from the casinos in the city. Right now, Detroit is bringing in about 11 million dollars a month in tax revenue from the casinos.
    14) There are 70 “Superfund” hazardous waste sites in Detroit.
    15) 40 percent of the street lights do not work.
    16) Only about a third of the ambulances are running.
    17) Some ambulances in the city of Detroit have been used for so long that they have more than 250,000 miles on them.
    18) Two-thirds of the parks in the city of Detroit have been permanently closed down since 2008.
    19) The size of the police force in Detroit has been cut by about 40 percent over the past decade.
    20) When you call the police in Detroit, it takes them an average of 58 minutes to respond.
    21) Due to budget cutbacks, most police stations in Detroit are now closed to the public for 16 hours a day.
    22) The violent crime rate in Detroit is five times higher than the national average.
    23) The murder rate in Detroit is 11 times higher than it is in New York City.
    24) Today, police solve less than 10 percent of the crimes that are committed in Detroit.
    25) Crime has gotten so bad in Detroit that even the police are telling people to “enter Detroit at your own risk”.

    • September 27, 2013 at 6:09 pm #

      It’s not like we don’t get any grants at all. Apparently we get quite a few, no?

      http://www.stocktongov.com/government/departments/publicWorks/adminFiscGr.html

      • David Garcia
        September 27, 2013 at 6:37 pm #

        The city receives the standard grants most other city’s apply for. We also just qualified for a DOJ grant for more police officers. It’s less about us not getting grants and more about streamlining and guidance given to other cities but not provided for others. How can Stockton compete with Fresno for TIGER grant money when Fresno has administration officials helping to put together their application? Also, not sure about the proportion of grants we get, but I am sure it is disproportionately low compared to the state’s other metro areas. I believe the Record ran a story on non profit grants, and Stockton receives fewer of those than our population suggests.

        Also, notice how much aid Stockton gets for road repaving. This is nice but money spent on repaving spurs very little return on investment, where as money spent on other modes of transit can provide more value. Case in point, why did Stockton use ARRA (aka stimulus) funds for road repaving? There are far more pressing needs than filling some potholes.

        As for Detroit, it is an interesting case study for urban enthusiasts. Yes, it has all of the problems Jon mentioned, but it also has an emerging downtown, tech scene and investment from corporations moving back into the city Bankruptcy will allow Detroit to restructure its debt and put it on a path for growth (as is the case in Stockton, hopefully).

      • September 27, 2013 at 7:28 pm #

        Could population have something to do with it?

        Detroit seems to have a serious declining population problem:

        https://www.google.com/search?site=&source=hp&q=population+of+detroit&oq=population+of+detroit&gs_l=hp.1.0.0l10.3064.10035.0.13313.21.10.0.11.11.0.162.1335.0j10.10.0….0…1c.1.27.hp..0.21.1545.DEg9f5WQ3mc

        Stockton seems to have quite healthy population growth:

        https://www.google.com/search?q=population+of+stockton+ca&oq=population+of+stockton&gs_l=serp.1.0.0l4j0i22i30l6.140766.146361.0.148929.15.12.0.3.3.0.184.1492.1j11.12.0….0…1c.1.27.serp..3.12.1150.6xz7fBoimdg

  4. September 27, 2013 at 6:36 pm #

    On a more serious note, don’t you think that somehow the San Bernardino bankruptcy and Stockton’s bankruptcy have also a serious CalPers component to them? Couldn’t San Ber make the same argument about Detroit? Doesn’t CalPERS have a strong Angelides (aka Democratic ) connection? So you think that CalPERS would have had nothing to say about possible grants to Stockton? This was a bitter fight from what I understand.

  5. Jon Seisa
    September 27, 2013 at 10:53 pm #

    Really, though, it doesn’t matter what the rationale is. It’s just not equitable to fast-track and streamline gargantuan aid to one bankrupt city while turning a complete deaf ear to another city for the same exact situation except for the fact that the other city underwent bankruptcy FIRST. David is right, why the overt and blatant favoritism and carte blanche treatment towards Detroit and not Stockton, nor other cities filing bankruptcy? And why this ignoring from Sacramento and the Feds of Stockton’s equally justified need for fast-track and streamlined aid and grants?

    • September 28, 2013 at 11:58 am #

      Usually these issues are decided on per capita basis.

      Say for example Detroit has 700K of population and 18 Bil. worth of debt. This would translate to roughly $26,000 per capita of debt. So against this debt they received a grant of roughly $420 per capita which made their per capita debt go down to approx. $25.5K/per capita. Nothing dramatic really.

      To make the apples to apples comparison you need to know how much debt Stockton has and then compare it on a per capita basis (i.e. divide by 300K people) to Detroit.

      For some reason I think the issue of grants was not decided on the basis of bankruptcy but on the basis of the severity of the debt problem. Detroit ended up with these grants because their debt situation looks quite pronounced.

      Detroit says the 300 Mil. is mickey mouse money and on a per capita basis it does very little to cure the problem.

      So it depends how you frame the issue. Is this money that each city with bankruptcy status should receive?(in such case we have 2 more Californian cities: Vallejo and San Bern as worthy recipients also). Or is it an issue of the deepest injury?

      Don’t forget moral hazard. Once you start doing something for one bankrupt city then you open Pandora’s box. I don’t think it’s a issue of low profile for Stockton. I could be wrong but it looks deeper than this.

      Of course if you are in politics you could spin everything you wish and then some. Is this a political issue or a fairness issue? And you can’t mix the two because then you lose the truth.

      • Jon Seisa
        September 28, 2013 at 8:10 pm #

        Remember the childhood game “Spin the Bottle”?

      • September 29, 2013 at 7:19 am #

        Yeah, who do you want to kiss? 🙂

      • September 30, 2013 at 6:08 pm #

        Stockton per this article below had $700 Mil debt; assuming 300k population the per capita debt is $2,333.

        http://www.scpr.org/blogs/economy/2012/06/29/6866/moodys-called-bankrupt-stocktons-debt-low-last-yea/

        Detroit has $18 Bil. worth of debt and a population of say 700K, or $25,714 per capita debt.

        So I think Detroit is a case of punctuated debt hence the financial aid.

        If we follow the Detroit formula ($300 Mil. aid for $18 Bil. debt), Stockton would have received $27 Mil and change.

      • Jon Seisa
        September 30, 2013 at 7:08 pm #

        Well, at least $27 million would have helped somewhere in the city system. Thanks for the math, by the way.

        Lol Dean… I don’t remember the kissing part in spin-the-bottle (perhaps I was traumatized and mentally blocked that part out), but I was using it here as a metaphor for a plethora of causative reasons via the Russian roulette method to determine why Detroit got a handout. Lol.

      • October 1, 2013 at 6:53 pm #

        Jon:

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