No Joy in Mudville

It has been reputed that the town baseball team in Stockton, California was the inspiration for the famous poem "Casey at the Bat," because they have long played baseball games on Banner Island, a place known as  Mudville. Some 125 years after Ernest Thayer wrote his poem, mighty Stockton has struck out:

Stockton, California, the biggest U.S. city to file for bankruptcy, won a judge’s permission to stay under court protection after he found that creditors didn’t negotiate in good faith with the city.

Creditors, including Assured Guaranty Corp. and Franklin Resources Inc. (BEN), argued that Stockton didn’t qualify for bankruptcy because its leaders didn’t negotiate a potential settlement in good faith and the city isn’t truly insolvent.

Why is Stockton, a city of nearly 300,000 people located about 80 miles east of San Francisco, in bankruptcy? Well, pretty much for the same reason that many individuals end up in bankruptcy:

Stockton joined cities across the country using the U.S. Bankruptcy Code to get out from under billions of dollars in obligations they couldn’t afford following the longest recession since the 1930s. Stockton rode a surge in new-home construction in the 2000s that preceded the housing crash and then a wave of foreclosures that sapped the city’s tax-revenue gains.

And there were other reasons:

The city is slated to stop paying for retiree health care on June 30 as part of a spending plan the City Council approved in June, citing a $417 million unfunded liability. The benefit had allowed workers employed as little as a month to receive city-paid health coverage for life for employees and spouses, City Manager Bob Deis said.

Emphasis mine. Think about that. Work a month, be set for life. Wonder why that didn't work out so well. But there was more, of course:

Born in the Gold Rush, Stockton struggled for decades, relying on tax revenue from farming and shipping at its deep- water port on the San Joaquin River. A housing boom in the early 2000s brought a surge in revenue as homebuyers, seeking refuge from soaring prices in San Francisco and Silicon Valley, flocked to Stockton, where starter homes cost around $400,000.

The city used the increase and issued debt to build a gleaming new arena and ballpark on its riverfront and to buy a new City Hall it later couldn’t afford to occupy.

Wow, money for ballparks and arenas? Thank goodness we'd never do anything like that here in the Twin Cities, but I digress. So what happened?

The Stockton metropolitan area last year had the highest foreclosure rate in the U.S., affecting one in every 25 homes, or almost three times the national average, according to RealtyTrac Inc., an Irvine, California-based data provider.

And what else happened to all those folks who bought the $400K starter homes?

About 14 of every 1,000 residents in Stockton were victims of violent crime in 2011, a year in which the city was yet again the second most violent city in California.

In crimes per capita, only Oakland outpaces Stockton.

And where does Stockton stand in the bigger picture?

Nationwide, Stockton was the 10th most violent city on a list topped by Flint, Mich. Detroit, St. Louis, Oakland and Memphis, Tenn., rounded out the top five.

Meanwhile, other California cities have been queued up for the same thing. San Bernardino filed for bankruptcy last year:

The city, located 65 miles east of Los Angeles, could become the third municipality in California to seek protection from its creditors since late June. Stockton and the ski resort city of Mammoth Lakes have already filed in bankruptcy court.

A fourth city, Compton on the outskirts of Los Angeles, could be the next city to turn to bankruptcy protection. 

And there will be more.