Stockton, Calif. Inches Closer to Becoming the Largest City in U.S. to File for Bankruptcy
- Posted on June 26, 2012 at 10:47am by
Becket Adams
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FRESNO, Calif. (The Blaze/AP) — Stockton officials continued to grapple with the city’s financial plight, struggling to restructure millions of dollars of debt threatening to turn the city with the nation’s second-highest foreclosure rate into the largest U.S. city to file for bankruptcy.
Council members met Monday night to discuss the financial plight. The city had until 11:59 p.m.to reach a deal with its creditors under a new state mediation law designed to help municipalities avoid bankruptcy. Stockton spokeswoman Connie Cochran said those negotiations were confidential and that nothing would be announced at the deadline.
“Nothing is going to happen,” until the City Council meeting, Cochran said.
Stockton, Calif. is facing a moment of decision on whether to become the biggest American city to file for bankruptcy, as the deadline for talks between the city and its creditors approaches late Monday. (AP Photo/Ben Margot, file)
Previous negotiating sessions with the 18 creditors have stretched past midnight and remained confidential. To avoid bankruptcy, any deal would have to result in sufficient savings to make the city solvent.
Officials have made preparations in case mediation efforts fail. The Stockton City Council is scheduled to decide Tuesday night whether to adopt a special budget to close the city’s projected $26 million deficit in case bankruptcy protection is sought.
California cities are required by law to adopt a balanced budget by July 1 of each year.
If mediation fails and council members adopt the special budget, Stockton’s lawyers could file for Chapter 9 protection in court as early as Wednesday, City Manager Bob Deis said.
City officials say this river port city of 290,000 in the Central Valley has run out of options. In recent years, thousands of new homes mushroomed in Stockton, part of a suburban housing boom that attracted buyers from the San Francisco Bay area and beyond.
When the economy crashed and the construction bubble burst, Stockton was battered by foreclosures and lost income from property taxes and other fees.
Multi-year labor contracts for city workers with escalating costs and generous retirement plans added to the burden. And expensive city investments — a promenade, a sports arena and a hotel – failed to produce an economic boon.
The city also has high crime and unemployment rates. It has twice topped Forbes magazine’s list of “America’s most miserable cities.”
“It‘s unfortunate we’re here but we need to keep working with the city,” said Mark McLaughlin, a member of the board of the city police officers’ union, adding that he fully expects a bankruptcy filing.
To plug next year’s anticipated $26 million budget hole, the proposed budget suspends debt payments and payments for legal claims; reduces payments for retiree medical benefits; further reduces some pay and benefits; and increases revenue through code enforcement and parking citations.
The proposed budget includes no major service reductions, Deis said.
“The whole purpose of filing Chapter 9 is to avoid an uncontrolled chaotic situation,” he said. “Bankruptcy provides the equivalent of a pause button. It retains services and provides structure so you don’t have a bunch of lawsuits.”
If the city files for bankruptcy, it will still have to work out a court agreement with creditors on how to pay them upon exiting bankruptcy.
If the city is able to reach a deal through mediation, Deis said, City Council members could modify Tuesday’s special budget to reflect the deal, or they could adopt the budget and come back in July to modify it.
Officials say they are optimistic, even if they decide to file for bankruptcy. They point to Vallejo, a smaller California city that filed for Chapter 9 protection in 2008 and emerged from bankruptcy last year.
“Vallejo is leaner, smarter and they’ve got the confidence of their citizenry,” Deis said. “I think Stockton will be doing the same.”
But for now, Moody’s Investors Service and Standard & Poor‘s Ratings Services says Stockton’s credit is junk.
“Moody’s has its issuer rating for Stockton at a junk level Ba2 from Baa1 while S&P has its issuer rating on the city from BB to SD, one notch above its D default rating,” Reuters reports.
And although it hasn’t happened yet, Gregory Lipitz, a vice president and senior analyst at Moody’s, says a bankruptcy filing by Stockton is a “high-probability event.”
The Associated Press contributed to this report.
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Comments (51)
blackyb
Posted on June 26, 2012 at 3:14pmSuck some more dope, California. Seems you want the dope there and your people are becoming unmotivated to work. People on drugs do not produce much for long. You ask for it, so solve it yourselves. Why throw good money after bad. Everyone cannot be a dope dealer, there has to be someone to buy and they need jobs so they can buy your product and deprive their families of any kind of life. They are soon not going to have any closets to lock their starving children into. Yes, just suck some more dope until you figure it all out.
Report Post »studi30
Posted on June 26, 2012 at 3:23pmThis looks like a job for Chris Christie and Mayor Cory Booker. Booker is Black and has a really bad city to manage. Newark NJ ranks in the top 10 cities for gun crime and murder.
Report Post »RETIREDOLDGUY
Posted on June 26, 2012 at 5:13pmwhy doesn’t Pelosi just give them the 26 million – she’s got it. Whats wrong piggy you want to keep your money but take it from everyone else.
Report Post »dmerwin
Posted on June 26, 2012 at 5:31pmNotify your senators and congressman that the US MUST NOT bail out California, Illinois and New York or any other state or local government that got THEMSELVES into financial problems.
Report Post »yougottabekidding
Posted on June 27, 2012 at 7:58amIt’s amazing how many meetings government has that involve us paying for
Report Post »their decisions that we are told it’s none of your business, it’s a secret.
GaryInTheMiddle
Posted on June 26, 2012 at 1:23pm(oo) I’m shocked!
Report Post »gigalynx
Posted on June 26, 2012 at 1:22pmThings were much better when the Barkley’s ran Stockton!
Report Post »Thomas_Jefferson_philosophy
Posted on June 26, 2012 at 12:52pmI am sure the government unions and democrat politicians had absolutely nothing to do with this. Somehow, it was Bush’s fault
Report Post »Shasta
Posted on June 26, 2012 at 1:37pmAll joking aside, Stockton is the new Detroit. Every large city in Ca will suffer this fate as long as progressives are in charge, unions are unwilling to yield even slightly, and Agenda 21 flows through the veins of the county governments.
Report Post »WTSpike
Posted on June 26, 2012 at 12:23pmBankruptcy? Thank a Democrat.
Report Post »1chancey1
Posted on June 26, 2012 at 12:02pmIt‘s a shame CA has such a big say in the National Election process when they can’t even run their own state. Pathetic.
Report Post »Shasta
Posted on June 26, 2012 at 1:43pmI live in one of the few conservative counties that Ca has left. We just kicked out Agenda 21 as did an adjacent county. Still, living in this state, means my vote in state and federal elections is always null and void. Yet I continue to vote. Now if I could just convince my kids. If Wisconcin can change, maybe…
Report Post »lukerw
Posted on June 26, 2012 at 12:01pmIf States are Sovereign… can make Trade Deals (Treaties) with Foreign Powers… and can go into Debt… exactly, how does Bankruptcy work? Does the Federal Government pay the Debt… thereby Own the State (alike a National Park)… alike a King owns Estates & Castles, with Surfs & Slaves?
Report Post »lukerw
Posted on June 26, 2012 at 1:23pmAre trying to return to a System of… Debtors Prison… and Indentured Servatude?
Report Post »Constructionist
Posted on June 26, 2012 at 3:01pm“If States are Sovereign… can make Trade Deals (Treaties) with Foreign Powers…”
No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress – Article I, Section 10.
Report Post »cemerius
Posted on June 26, 2012 at 3:34pmStates by the Constitution can not file bankruptcy but cities can and do…..
Report Post »progressiveslayer
Posted on June 26, 2012 at 11:53amDon‘t worry Stockton the feds have an unlimited supply of worthless dollars to give you and when the feds need a bailout they’ll get the money from……………well they won‘t get anymore because the well’s run dry.
Progressives have created many dead cities and Barry wants to duplicate their success all across the country and he’s done a hell of a job so far.
Report Post »Tankertony
Posted on June 26, 2012 at 11:41amThis is what progressive marxism looks like. Bye bye California.
Report Post »lukerw
Posted on June 26, 2012 at 11:52amTaking Baby Steps… toward the Chair… under the Noose!
Report Post »checkmaster1965
Posted on June 26, 2012 at 11:38amany town city or state under liberal rule ends this way
Report Post »bdandsl
Posted on June 26, 2012 at 11:38amEvery state and city in America should file bankruptcy to get out from under all the crazy pensions. Give them a fair pension, but no one should be retiring, paid by taxpayers, at 90% of their salary for 20+ years. Yea, we’d all love those pensions, but it’s neither sustainable nor fair.
Report Post »Stoic one
Posted on June 26, 2012 at 11:36amHa ha ha… pig city Cincinnati Ohio is broke too. Those idiots, err i mean politicians want to build a street car that nobody will ride and OH YEA a green atrium over the city hall central courtyard parking lot! These fools don’t care they are ruining everything they touch….
Report Post »abbygirl1994
Posted on June 26, 2012 at 11:30amLets call Stockton CA Little Greece! I certainly don’t want to bail out any part of CA. You reap what you have sown and I don’t feel sorry for them at all!
Report Post »Blazebanned
Posted on June 26, 2012 at 11:21amSo what will the union workers do now?………
Report Post »AustinMilbarge
Posted on June 26, 2012 at 11:21amA California city with one of the highest illegal immigrant populations in the state. Oh, but..but we can’t cut any of THAT funding! They get what they deserve.
Report Post »TSUNAMI-22
Posted on June 26, 2012 at 2:43pmNope, that would be Modesto you’re thinking of.
Report Post »chazmo
Posted on June 26, 2012 at 3:59pmActually the Imperial County.. Imperial County will be the first County to go bankrupt.. Mark it down.
Report Post »tckid17
Posted on June 26, 2012 at 11:16amI thought this was the “Summer of Recovery” like VP Joe Biden said. Maybe Ben Bernanke can print more money and make it all go away.
Report Post »SREGN
Posted on June 26, 2012 at 11:16amAs California goes, so goes the nation.
Report Post »Mr Sanders
Posted on June 26, 2012 at 12:21pmlets hope not!
Report Post »Shasta
Posted on June 26, 2012 at 1:44pmProgressivism is a disease. Califronia was not always this sick. If it is not stopped now, at its roots, it will take over the nation.
Report Post »22gramps
Posted on June 26, 2012 at 11:13amAnother success story for publicly unions. When will we learn?
Report Post »bobbyjoe
Posted on June 26, 2012 at 11:08amAnother demoncrat success! Isn’t this their plan after all.
Report Post »lukerw
Posted on June 26, 2012 at 11:22amMany Blue States must fail… to provide the Synergy… for a Singularity… which gives birth to a Socialist Nation where a Dictator resolves all problems… where the Propaganda Machine tells you how much better off you are in Not Knowing nor Deciding!
Report Post »HKS
Posted on June 26, 2012 at 11:07amIt would appear to me that all of the US cities in trouble should do the same as soon as possible, stop the bleeding and then get back to work. This mess they have built is not sustainable and they know it but no one wants to say it out loud. Bite the bullet and get it over with so we can work back to a civilized society. The one thing they need to keep in mind is that cities and any other government is an overhead expense and must be a limited expense.
Report Post »Mr Sanders
Posted on June 26, 2012 at 11:03am… and the dominos start-a-fallen in Kalifornia. Wonder what it’ll look like from space if you plotted it in red dots/ink when its all done? Interesting?
Report Post »Detroit paperboy
Posted on June 26, 2012 at 11:01amYou mean they can’t just print the money like Obama…………
Report Post »Gonzo
Posted on June 26, 2012 at 10:58amDon’t worry Stockton, the rest of the state is right behind you.
Report Post »Steelheadisadouche
Posted on June 26, 2012 at 11:01amAnd in so many aspects of “behind you”.
Report Post »lukerw
Posted on June 26, 2012 at 10:55amHOW TO… turn a Gold Mine… into a Sink Hole!
Report Post »teddrunk
Posted on June 26, 2012 at 10:53amNo doubt this town was run by conservatives, right?
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