The city is now officially bankrupt – but small business owners in Stockton, California, are mostly optimistic about their economic futures.

“With the scare of the city going bankrupt, people were afraid to spend,” says Stockton’s Kharma Salon owner Chrissy DeHoyos. “But now the fears are actually subsiding.”

Despite some anxiety – and a 15.5% unemployment rate in January – many business owners said that reduced revenues have not been a major problem. The city’s crime rate, however, has had an impact, as Stockton’s economic troubles led to police cuts.

Stockton: Not so Different from Any Other City

Gene Wright, the owner of Wright Realtors, says that Stockton’s problems are more closely tied to the real estate bubble bursting – not the city’s bankruptcy issues.

“People don’t want to just give their property away,” says Wright. “It’s a hot buying market now, but a poor selling market. Everything is REOs or short sales.”

Economist Jeffrey Michael, the director of Stockton’s University of Pacific Economic Forecast Center, agrees with Wright’s analysis, saying, “Stockton was fast growing during the housing boom, which led to 15 years of aggressive budgets and heavy borrowing.”

“Stockton slammed into the housing collapse harder than almost any other city in America, and the city’s financials were structured around this,” he adds.

Despite this, Wright says that the market is slowly improving, like most other cities in the United States. “Sale prices are up 6% from a year ago,” he says. “But I’ve been wanting to sell my home and retire for years now, and I’m still not going to sell in this market and just give it away.”
Business as Usual

DeHoyos, the salon owner, said that her business took a slight hit during Stockton’s bankruptcy crisis. “I had a lot of clients that worked for the city. When they were forced to pay for their own insurance, it caused them to not come in as often,” she says.

But the majority of the business owners that spoke with FOXBusiness.com said that their revenues were holding steady. Steve Copello, owner of the popular Stockton restaurant Angelina’s Spaghetti House, says that the Stockton bankruptcy in particular hasn’t had any effect to his knowledge, and that revenues were actually improving a little bit as the general economy picked up.

At Basil’s Restaurant and Bar, bartender Larry Sbragia, who has worked there for 30 years, says that while “the unemployment rate is high, the rate has always been higher in Stockton, because it’s a farming community.”

Sbragia adds, “I don’t think the bankruptcy is affecting individuals who are working. I haven’t noticed any difference in that fact.”

Greater Stockton Chamber of Commerce president Gary Long agrees that spending is more or less steady. Long is also the owner of Gary Long Jewelers. “Instead of selling a lot of 2 and 4 carats, we’re selling 1 and 2. Our number of pieces hasn’t gone down – in fact, it’s maybe gone up -- but people are just buying everything cheaper,” says Long.

When it comes to bankruptcy, Long says, “The city proper is not the business community.”

Crime Takes Its Toll

M&W Dutch American Bakery owner Mallu Dalichau says that her business has also done well, given the shop’s low prices. But the uptick in crime in the city has hurt the bottom line of the bakery, which Dalichau owns with her husband.

“Our delivery van was stolen and stripped down, which we use to sell at farmers’ markets. And we’ve been broken into,” she says.

In fact, Dalichau says that all of the stores near her bakery, minus the local Curves gym, have been broken into in the past few months, causing many to close down.

Stockton Police Department’s Public Information Officer Joseph Silva says that since 2008, the police force was decreased by over 100 sworn officers in order to cut costs. “Policing in Stockton is unique,” says Silva, “because we have limited staffing.”

Silva says that crime had reached a high enough peak between 2011 and 2012 that the department was forced to “rely on outside forces. We now have a burglary watch group – like a neighborhood watch group – where businesspeople report on suspicious people and vehicles.”

“They’re our eyes and ears … it’s been very effective,” Silva says, adding that an increased social media presence has also helped the police department fight back against crime.

For Dalichau, though, it may be too little too late: “I love Stockton and the people, but when you get hit twice … You get drained. I just don’t have the energy.” Dalichau says that the van alone cost her and her husband over $10,000, despite having insurance.

“It’s been 12 years in this business in Stockton, but we would leave if we had the money.”

Follow Gabrielle Karol on Twitter @GabrielleKarol