Friday 20 October 2017

City that paid Diamond $1m goes bust

Nick Allen in California

WHEN 10,000 citizens of Stockton, California, sang along with Neil Diamond at the opening of their city's shiny new concert hall, it seemed like the good times would roll forever.

It was 2006 and local officials were happy to pay the musician $1m in taxpayers' money to perform 'Sweet Caroline' as they rode high on the back of a turbocharged housing market.

However, the concert has come to symbolise the financial irresponsibility that now has the city staring into an abyss.

Barring a last-minute reprieve, Stockton, which has a population of 300,000, will become the largest city in American history to file for bankruptcy on Tuesday. Its demise is perhaps the most extreme example of a nation's boom-time spending splurge, and a cautionary tale of what happens when the bills finally have to be paid.

"I have nothing personal against Neil Diamond, but that was just a huge waste of money," said Ann Johnston, the mayor charged with cleaning up Stockton's financial mess.

"It was a time of excess, of grandiose dreams and gross ambition. We're like a homeowner who took out second and third mortgages and then everything crashed. We will be cash insolvent by the end of this month," said Mrs Johnston.

Stockton, 80 miles from San Francisco, began life as a transport hub for the gold rush 160 years ago. At the height of the economic boom, 3,000 homes a year were being built in the city and its population grew by 20pc in a decade as it sought to join the San Francisco commuter belt. In addition to its $80m glass-fronted concert arena, a 5,000-seat ballpark also went up for the local minor league team.

A $42m superyacht, the Casino Royale, dominates the marina. It shimmers like a mirage in the sun, while in its shadow a homeless man pushes a trolley.

During its glory days, Stockton splashed out $35m on an eight-storey building which was to be a city hall. Officials never moved in and it was repossessed by the bank a few weeks ago. Inside the current crumbling city hall, the tap water is undrinkable and there are rats.

Due to its massively inflated housing market and soaring debts, the city was hit hard when the recession came after the 2007 sub-prime crisis.

Its home foreclosure rate was the highest in America, property values dropped by up to 75pc and businesses went under. Unemployment is now at 19pc. The council's revenues from property and sales taxes were decimated by the downturn.In addition, it had given away sumptuous benefits to city employees, including medical care for life.

Officials are in talks with creditors over $350m the city owes bondholders. Those talks end on Monday and, if they fail, bankruptcy proceedings will start. Mrs Johnston has already slashed public-sector staffing and pay.

The 425-strong police force has been cut by 25 per cent. The result has been a crime wave with a record 58 homicides last year. Gang members taunt the remaining officers, asking them when they will get laid off.

As the city awaits the bankruptcy verdict, Mrs Johnston said: "This recession keeps dragging on and we are still at the bottom. Neil Diamond will not be coming back." (©Daily Telegraph, London)

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