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Congratulations to Stockton, California, on becoming the largest city in American history to enter bankruptcy! Not really. … That’s actually sad.
The city, which has 300,000 residents, borrowed millions of dollars in the early 2000s because they expected long-term developers’ fees and property tax revenues to pour in. But then the housing bubble burst, and you know the rest of the story.
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Stockton lost all of those expected revenues during a foreclosure frenzy in the mid-2000s, which led to a 70% decline in the city’s tax base. The city’s biggest single debt is $900 million, which is owed to the California Public Employees Retirement System (CalPERS). To date, Stockton has stayed current on its pension payments by neglecting its other debts, but the bankruptcy judge left open the possibility to renegotiate the city’s obligations to CalPERS.
This is yet another reason why you can't rely on the government to help you, especially when it comes to money. If you're waiting on the government, you'll be waiting a long time. Just ask the residents of Stockton, California.