The Stockton City Council halts bond payments, slashes employee benefits and adopts an emergency budget as mediation ends. The Central Valley city becomes the largest in the U.S. to seek bankruptcy protection.
Expensive waterfront redevelopment projects are one reason for Stockon’s financial problems. The city has the second-highest rate of foreclosures in the country and the second-highest rate of violent crime in the state.
This Gold Rush-era port city, an epicenter of California’s agricultural exports, will become the nation’s largest city to seek protection under the U.S. bankruptcy code after its City Council on Tuesday stopped bond payments, slashed employee health and retirement benefits and adopted a day-to-day survival budget.
City Manager Bob Deis likened the process to cutting off an arm to save the body. He is expected to file bankruptcy papers immediately.
A Delta wind had scrubbed the Central Valley sky blue as residents gathered hours early for the 5:30 p.m. meeting.
Most knew what the night held; bankruptcy has been a long time coming. Stockton has been in negotiations with its creditors since late March under AB 506, a new California law requiring mediation before a municipality can file for reorganization of debt. It was the first use of the law, and policy analysts who watched its torturous and tedious progress have titled their report on it “Death by a Thousand Meetings.” Mediations ended Monday at midnight.
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