By Elliott Wave International
As pundits chatter about an economic recovery, 80 miles east of San Francisco you’ll find a city (pop. 292,000) facing bankruptcy:
Stockton is on the verge of becoming the largest city in the United States to declare bankruptcy…
San Francisco Chronicle (3/4)
Bloomberg reports (2/25) that it costs the city $175,000 just to get a consulting firm’s fiscal evaluation. Management Partners issued a report which said:
…the city took on a large amount of debt in anticipation of ongoing growth that now exceeds the city’s ability to pay.
Compensation packages exceeded sustainable levels and the city assumed a significant liability for improved retiree health coverage without sufficient recurring revenues to cover growing costs…
Stockton also has one of the nation’s highest home foreclosure rates and has been called “Foreclosureville USA.”
And Moody’s just downgraded Stockton’s rating to Ba2, which is two levels below investment grade.
In the same Bloomberg article, the California State Treasurer said “The reputational stain can bleed onto other local issuers and the state, and that can hurt taxpayers in the bond market.”
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