The city of Stockton moved a step closer to becoming the nation’s largest city to declare bankruptcy, authorizing the city manager to file for Chapter 9 protection from creditors.
A 6-1 vote after a tense 4 1/2-hour public meeting Tuesday directed City Manager Bob Deis to file if the current mediation process fails. On March 27, Stockton stopped payments to creditors and entered a confidential mediation process under AB 506, a California law designed to slow municipal bankruptcies by forcing all parties to the table. Under this law, the bargaining period has a 60-day limit, unless all parties agree to extend it for another 30 days.
The city and its creditors agreed to extend negotiations through June 25.
Deis said he wants to be ready to go to bankruptcy court the next day if talks fail.
A statement released by the city described the financial situation as “dire” and noted that the city will face a $26-million deficit by July 1.
The port city of 290,000 has one of the highest home-foreclosure rates in the nation, as well as a high rate of violent crime. City Hall also is in an ongoing struggle with police and city workers unions over pensions. It has already cut many city services and is selling off properties such as city parking garages.
“It’s time to stop the chaos and degradation of this organization and fix the structural imbalance,” Deis said in a statement. “We have to start the road to recovery.”
Courtesy of Los Angeles Times Local go to link directly http://latimesblogs.latimes.com/lanow/2012/06/stockton-bankruptcy-another-step-closer.html
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