The city of Stockton, Calif., with a population of nearly 300,000, made headlines last month by being the biggest city in the U.S. ever to declare bankruptcy. It's a painful process that other cities are following as well; only yesterday, the city council of San Bernardino, Calif., with about 210,000 residents, voted for bankruptcy. Last week, hard-hit Scranton, Pa., cut the pay of public workers down to the state minimum wage, $7.25 an hour.
For perspective on what the Stockton bankruptcy means to events, Special Events has interviewed one of our Advisory Board members: Steve Anthony, CEM, president and CEO of Stockton-based American Event Rentals. Both a civic and industry leader, Anthony has served as financial vice president of the Greater Stockton Chamber of Commerce and president of the Stockton/San Joaquin Convention and Visitors Bureau. He is the current chairman of ARA of California and has served on a variety of national committees for ARA.
A native of Sacramento, he moved to Stockton in 1985 to start his business. In 2005, he bought a party rental company that had been in business for 30 years; "We expanded and purchased new equipment to make the company four times as large as when we purchased it," he notes.
SPECIAL EVENTS: Does the bankruptcy affect any contracts you now have with the city?
STEVE ANTHONY: Fortunately, we do not have any contracts with the city at this time. We were contracted in 2007 for some small table and chair rentals, but that dried up.
Our city made the decision a few years ago to not use local businesses that are less expensive and employ local citizens. Instead, they go to a large party rental operation about 35 miles south of Stockton. This type of decision is not surprising since Stockton’s city employees have no concern for local small business. Their attitude is that we are a revenue pool that they need to tap into.
I have been on my soapbox about this for years. The mayor, various city council members, and city staff have all heard my complaints. There have been no complaints, no poor service, no dirty product. We just haven’t been fortunate enough to be a favorite of someone in power. I simply cannot understand why my city tax dollars are travelling south to pay for items that I have in my warehouse at a lower price.
Q: Is the city in touch with you on updates or do you have to pester them?
Q: We did receive a letter [yesterday] stressing that vendors and service providers will be paid despite the city’s recent filing for Chapter 9 protection.
The way that Stockton will be working with their vendors is through what they are calling a "pendency plan." This is a budget that moves the city through the Chapter 9 bankruptcy and puts in place a direction for the city to follow. For most businesses in Stockton, the impact of this filing will have long-term implications. No longer will the city have an attraction as a destination for business relocation. Any kind of expansion or improvements will be put on hold indefinitely. After all, who would want to lend money to a bankrupt entity?
Unemployment in Stockton is at an all-time high. This will not get better. The drain on city services will increase as there will be no additional tax dollars to cover any type of recovery. Couple this with Stockton’s sharing the dubious honor of being the "foreclosure capital of the world" and you can see why people are running from Stockton.
Q: What has the bankruptcy announcement done for your clients? Are they suddenly more skittish?
A: The atmosphere in Stockton is one of duck and cover. Entities like the fire department are kicking into high gear with trumped-up inspections and permits that will certainly cripple small businesses. Their attitude is that small businesses need to pay more, and this is a way to recover some of the revenue taken away from them by the city manager. The “situation” that Stockton is muddling into is far reaching and is alarming to businesses located within the city limits. We are all asking ourselves, “Where will we all go from here?" Capital improvements are on hold until we know how the city will fare post-BK.
Q: Have you changed anything about the operations of American Event Rentals since the bankruptcy announcement?
A: We have not changed any of our operations since the city announced their filing of Chapter 9. People will still get married, graduate and celebrate. We want to be there to help them.
We are ramping up for increased marketing to promote our brand. It’s important to us to be the resource of choice for the people that live here. We can’t hold our business down by the throat because of poor choices of current and past city administrations.
To this day, waste continues in various departments. This won’t change. We cannot stand by and watch; American Event Rentals will continue with a marketing plan set in place to make us the leader in our area.
Q: How fast do you think this issue will be resolved?
A: I knew since 2009 that Stockton was on a collision course with bankruptcy. Previous city councils negotiated untenable contracts with public safety unions. These contracts didn’t protect the city—us--and totally benefitted fire and police. Retirement pensions and benefits really spun out of control. The attitude of “keep them happy and they won’t complain” was a huge mistake and was a precursor to this debacle. I’m sure in some eyes that filing for bankruptcy was the only way to get out of these agreements. Stockton made some really remarkable mistakes, like a multimillion-dollar marina that cannot ever pay for itself. The opening act for the new arena was Neil Diamond--that act alone cost the city $1 million!
This self-induced plague will linger with our community for years. After all, we are the largest city in the United States to file for bankruptcy. Even if others follow suit, as long as we are the largest, we will be trapped by our own failure to succeed. The city of Vallejo [Calif.] still makes headlines as they struggle. [Vallejo declared bankruptcy in 2008, emerging last November.] Stockton will be no different.
Q: We read that many cities are one step away from bankruptcy—do you agree?
A: I think other cities will file for protection. The unique ability to respond to market conditions has eluded most government officials. Private entrepreneurs adapt and change with the market. Cities like Stockton did not. When the housing bubble burst, so did Stockton’s steady stream of tax revenue. Foreclosures and a high unemployment rate were the perfect formula to drive the death nail into this city.
The road to recovery will never happen in Stockton with the construction market. The fees and permits are so expensive that the city has created a self-induced building moratorium. Inherent with that posture will be no increased revenue through building fees.
As millions of dollars in property sits vacant in Stockton, with no taxpayers to pay taxes, one would wonder what the solution is. From a business perspective, it’s pretty easy:
1) You need to create an incentive to businesses to relocate or expand here. Cutting fees in half and developing programs to assist businesses are critical to this endeavor. 2) One of the most negative black eyes on our city is crime. Every day needs to be "crackdown day" in Stockton. Police officers need to be on high alert. The bottom line here is that we need more cops. Six police units patrol Stockton overnight. Is that really a deterrent? The city needs to stop the flow of parolees from the state of California. Per capita, we are flooded. It’s no wonder that our crime rate is so high. 3) Create a massive city-wide effort to occupationally retrain our workforce to match the dynamics of the job market. I have had a job opening for a counter person and a driver for over three months. I have had no qualified applicants.
Q: Is there anything unique to Stockton that brought the city to this point?
A: I truly believe that city officials have no concept of private business, no concept of what it is like to be responsible for a payroll. My employees depend on me. Their families depend on me. It’s an enormous amount of pressure.
The current city council has it in their minds that this disaster is borne from decisions of previous councils. The fact is that they share in the blame, as they too have made poor decisions. There is plenty of blame for all. Republicans and Democrats alike on this council are part of the problem. They do not have a plan and are reactionary to the direction of the city manager. There is no leadership.