Stockton set to become the largest US city to declare bankruptcy!

Ouch. This is not looking good for the US where an entire city has just filed for Chapter 9 bankruptcy.

Fox News

Officials in Stockton said Tuesday that mediation with creditors has failed, meaning the city is set to become the largest American city ever to declare bankruptcy.

City Manager Bob Deis said officials were unable to reach a deal to restructure hundreds of millions of dollars of debt under a new state law designed to help municipalities avoid bankruptcy.

Monday marked the three-month deadline for negotiations.

"Unfortunately we have no comprehensive set of agreements with our creditors that would eliminate the deficit and avoid insolvency," Deis said at a City Council meeting. He said, however, that the city was still negotiating with some creditors and could reach deals with as many as one-third of them.

"We think Chapter 9 protection is the only choice left. If we get any agreements, those will be honored in Chapter 9," Deis said.

The Council was expected to vote later on a special bankruptcy budget to plug next year's anticipated $26 million deficit.

The budget is expected to suspend debt payments, reduce payments for retiree medical benefits and increase revenue through code enforcement and parking citations, among other steps.

City lawyers could file for Chapter 9 protection in court as soon as Wednesday.

The river port city of 290,000 in Central California has seen its property taxes and other revenues decline, while expensive investments and generous retiree benefits drained city coffers.

In the past three years, officials in the city that was slammed by the collapse of the housing market dealt with $90 million in deficits through a series of drastic cuts.

They eliminated one-fourth of the city's police officers, one-third of the fire staff, and 40 percent of all other employees. They also cut wages and medical benefits.

To plug next year's anticipated $26 million budget shortfall, a proposed budget to be considered Tuesday night would suspend payments for debts and legal claims, reduce payments for retiree medical benefits, further cut some pay and benefits, and increase revenue through code enforcement and parking citations.

The proposed budget includes no major service reductions, Deis said earlier.

"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."

reply to post by surrealist

The budget is expected to suspend debt payments, reduce payments for retiree medical benefits and increase revenue through code enforcement and parking citations, among other steps.

The code enforcement, parking citations and other steps(?) part sounds a little vague and a little scary. I think I'd be making plans to move.

how does a city of 290,000 people rack up 26 million dollars in debt thats almost 1mill per 10,000 people thats just a little ridiculous dont you think??

Sad part is Stockton was never a nice place to start off with. I live 20 miles from there and theres a rule, never stop for gas in stockton unless you want to get jumped

your car is really "gone in 60 seconds" in stockton

Originally posted by cavalryscout
reply to post by surrealist

 

The budget is expected to suspend debt payments, reduce payments for retiree medical benefits and increase revenue through code enforcement and parking citations, among other steps.

The code enforcement, parking citations and other steps(?) part sounds a little vague and a little scary. I think I'd be making plans to move.

That line stuck out to me also. How much revenue are they planning on receiving from parking tickets? And what have they been doing if they are thinking of more code enforcement? I read an article in Reuters and it said they have in the past been cutting law enforcement. Sounds like they are in a no way out situation. I think many cities are not far behind.