Historic little Sacramento County town has king-size problems

The most serious problems started back in 2004, when Pam Pratt was recalled as mayor of this tiny city on the Sacramento-San Joaquin River Delta, a half-square-mile known these days for crawdads and municipal chaos.

In the dysfunction that followed, Isleton stopped paying its bills. City workers and council members ran up $600,000 in attorneys' fees. The city spent more than $156,000 that belonged to its waste collector and had to pay it back -- with interest.

Money disappeared from the Crawdad Festival. Budgets were based on growth that never materialized. The city administration raided more than $150,000 from redevelopment funds to keep Isleton running.

Then, just when Isleton had hatched a plan to try to borrow its way to solvency, the economy fell apart.

With tax revenues dwindling and credit scarce, even healthy cities are facing painful choices. Troubled ones are increasingly vulnerable. These days, it's hard to find a California city in as much distress as Isleton, which has 817 residents, is $950,000 in the hole and is trying like crazy to stave off bankruptcy.

"Some people have said, 'Just hand it over to the county and go home,' " said City Manager Bruce Pope, who was hired in 2007 to help turn Isleton's fortunes around. "Sacramento County has its own deficit. They don't need our problems."

Not to mention that "disincorporation" is complicated and expensive. The last California city to pull the plug on itself is believed to have been Cabazon in Riverside County, about 1972. The process would cost Isleton about $250,000, and the government would still have to provide full services even as it breathed its last.

If Isleton had that kind of money, Pope noted, it wouldn't need to commit civic suicide. His city may be too poor to live, but it's also too poor to die.

Many of Isleton's miseries have been self-inflicted, but it's far from the only California city in difficult straits. Hard-luck Rio Vista, just across the Sacramento River, has consulted with bankruptcy attorneys but managed to cut its way to relative safety -- for now. Vallejo, 36 miles northwest, filed for bankruptcy protection in May.

Watsonville closed all city services except police and fire for two weeks over the holidays. Calexico declared a fiscal emergency last week.

The state's 10 biggest cities are more than a quarter-billion dollars in the red this fiscal year. Next year, San Francisco and Los Angeles predict a combined $1-billion deficit.

Anyone looking for a symbol of Isleton's woes need only drive to the eastern tip of 6th Street. The road ends with an unfinished, weed-filled traffic circle, at once shabby and vaguely optimistic.

To the north rise 18 new three-story homes, with Craftsman touches, a riparian palette and model names like "Brianna" and "Isabella." There were supposed to be about 80 houses in the first phase and ultimately more than 300 units.

A dispute over water infrastructure halted construction. Then the housing market crashed. Today, the houses are empty.

But if the development is completed, it could pose more problems for Isleton. For starters, the city's fire equipment isn't tall enough to protect the houses -- even if the new neighborhood had water.

Before construction begins on any project, developers and city government agree on so-called impact fees to pay the city for necessities, such as sewers, roads, and police and fire service.

In the case of the Village on the Delta development, "the impact fees agreed upon by the inexperienced representatives and staff are inadequate and place a further burden on the city's finances," a 2008 report by the Sacramento County Grand Jury warned.

Last year's investigation, the sixth grand jury proceeding to focus on Isleton since 1990, described the city as "in a state of perpetual crisis."

Many small municipalities have difficulty recruiting and keeping experienced staff and finding residents willing to serve as council members, but Isleton stands out. It has churned through six city managers since 2003 and eight mayors since 2004 -- half a dozen of those mayors in one 13-month stretch.

At various times in the recent past, only three of the five City Council seats were filled, and many major decisions were made by an illegal 2-1 vote.

The most recent grand jury report singled out the Isleton Firefighters Assn. and volunteers -- under a previous chief -- as a major problem, noting that they "seemed to believe they were running the department independent of city oversight." One example: they decided to buy the chief an SUV without city approval.

"It was a Keystone Kop management system," said Donald W. Prange Sr., foreman of the grand jury. "Isleton was such a screwed-up mess and still is. I can understand why they're in the fix they're in. . . . I hate to see it. It's a good little town."

Self-proclaimed "Crawdad Town" and onetime Asparagus Capital of the World, this "good little town" is located on a bend in the Sacramento River.

Its early canneries are long gone and pear orchards are giving way to vineyards, but the economy still relies heavily on agriculture and river recreation. Downtown is dotted with businesses selling bait and repairing boats. Snowy egrets land in winter-plowed fields.

When Isleton's historic, two-block Main Street burned to the ground in 1926, it was rebuilt soon after and is on the National Register of Historic Places. Today it retains the flavor of its Chinese and Japanese heritage, although the Bing Kong Tong building lists to one side. Nearly as many businesses appear closed as open.

"People always say, 'What's in Isleton?' " complained Mayor Gene Resler, whose day job is selling real estate. "I always say, 'If you have to ask, you don't belong here.' "

Most mayors have high praise for their hometowns, but Resler has gone his compatriots one better. A member of a short-lived 1960s psychedelic pop band called Afterglow, the mustachioed Resler has written a song about life in the heart of the delta. The as-yet-unrecorded number concludes:

Hear the wind through the trees from the soft delta breeze, makes you want to stop and say,

Oh there's nothing I swear that could ever compare to another Isleton Delta Day.

Karen Franscioni, who owns Summer Wind gallery and stained-glass studio, tears up when she tries to decide what makes the delta so singular. The water? The pace? The history?

Like many delta old-timers, Franscioni never gets in her car without reading material and time to spare. The main way in and out of town is via drawbridge -- as unpredictable as it is picturesque.

Her gallery, with its false wood front and deep awnings, was a grocery store that served the city's large Japanese population before the internment camps of World War II.

"Have you been on Staten Island when the sandhill cranes come in?" she asks. "It can be a foggy day, and you'll hear the geese honking. . . . The charm of Isleton and all these delta towns is the river."

An informal group called the Main Street Merchants has begun meeting regularly to brainstorm about how to attract critical tourist money. They launched a website, www.historicmainstreetisleton.com, to lure travelers who might be interested in the upcoming Spam Festival (complete with cook-off, tasting and Spam toss), the historical walking tour, or the acupuncture exhibition.

"If tourists come out and find us, it'll be a profitable place. A lot of buildings have been painted and cleaned up. It's starting to look like a mini-Sonoma," founding member Chuck Hasz said without a hint of irony. Hasz owned an escrow company in Woodland Hills and is refurbishing a building on Main Street.

But the river's charms are not enough to bring solvency to a shrinking business district and normalcy to a troubled government.

To decrease costs, Isleton cut the number of police officers and hours of service. The city considered disbanding the Police Department and contracting with the Sheriff's Department, but Pope said it "would take more than the entire city budget."

A proposal to increase fire inspection fees filled City Hall with angry merchants after a leaflet warned that churches would even be charged $90 to light candles. (Not so, new Fire Chief Bob Bartley said.)

Pope, the newest city manager, previously headed Sacramento's redevelopment operations, and he has brought more order to Isleton's government than it has seen in decades. Much of the redevelopment fund money is back where it belongs.

He hired a city attorney for $50,000 a year instead of giving municipal workers open-ended access to a pricey Sacramento law firm, and he negotiated the earlier attorney debt down to $325,000.

Over the summer, Pope worked with an underwriter to see if Isleton could issue bonds to raise money. An investor was found, but the deal fell apart, and then the bond market tanked.

"By September," Pope said, "we started scurrying."

The idea was to find a lender. But halfway through the month, Lehman Bros. filed for bankruptcy, the federal government moved to bail out the nation's financial system and credit all but disappeared.

Just before Thanksgiving, Pope announced that if Isleton couldn't borrow $1 million by the end of the year, he would urge the City Council to follow Vallejo into bankruptcy.

"Just the name -- bankruptcy -- sounds like you're going down the tubes," Resler mourned last month. "As a city, it's the only reason we'd do it, to get back on our feet, not to dissolve."

Pope's deadline has come and gone without a lender or a bankruptcy filing. The $950,000 debt, however, remains -- nearly as much as Isleton's annual operating budget.

In recent weeks, Pope has worked with yet another underwriter to sell so-called certificates of participation to erase the debt. The City Council approved the plan 4 to 1 last Wednesday night and is hoping for the best.

The deal "is not signed, sealed and delivered" yet, Pope noted. If and when that happens, the hard part will begin: Paying back the investors, which could take up to a decade.

"We'll make whatever cuts we have to make," he said. "It's working under the somewhat new concept: you have to pay your bills."

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maria.laganga@latimes.com

Times staff writer Lee Romney in San Francisco contributed to this report.

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