Stockton Throws in the Towel and Files for Bankruptcy

Stockton, CA — For 2 years in a row, for fiscal years 2010-2011 and 2011-2012, the city of Stockton has declared a fiscal emergency to save the city from declaring bankruptcy. Unfortunately, like a drowning person trying to avoid death by gasping for the last few precious breaths of air, Stockton has been overwhelmed with debt and was unable to fix the $37 million budget deficit of the city and has now thrown in the towel and declared the city of Stockton, California bankrupt beyond reasonable doubt. This is the biggest city in the United States to financially fail in epic proportions.

Stockton Throws in the  Towel and Files for BankruptcyStockton City Manager, Bob Deis that they will be immediately filing the bankruptcy petition and associated the action to an amputation operation to save the rest of the body.

The city founded by Captain  Charles Maria  Weber was founded during the Gold Rush era and has been the center of agricultural exports in California has been in talks with its creditors  and since March of this year which was done through long arduous debt mediation meetings. The debt mediation is covered by AB 506 which requires municipalities to undergo mediation first before filing for debt reorganization or bankruptcy and it is also the first time that the law had been used.

It is not a surprise that Stockton is filing for bankruptcy, we even blogged about it before (Stockton, CA Declaring a Fiscal Emergency in an Effort to Avoid Bankruptcy). Back in June of 2011, when the city declared its second fiscal emergency, they brought in the services of John Knox of the Orrick, Herrington, and Sutcliffe law firm (he was charging $900 per hour), had 3 Human Resource Directors in a city which has lost almost half its workforce and they also hired a human services consultant for $160 per hour. A lot of the city’s unions were pointing these facts out, the city of Stockton was retaining or hiring people that were involved in the bankruptcy case of Vallejo in 2008. This bankruptcy filing has been more or less staged because the city at the time of the fiscal emergency was having problems with the labor unions. They were not able to reach any compromise in terms of slashing benefits, early retirement and salary reduction.

In a city where families have known each other for generations, residents spoke out for each other during the city council meetings. The main thing they argued for was the health insurance for the city’s retired employees with illnesses. $90 million of salaries and benefits have already been slashed from the budget since the start of the fiscal emergency and with the bankruptcy filing the residents expect more loss of benefits and it is a scary situation because it will involve reducing retirement benefits. A bleak future lies ahead for retirees who no longer has any capabilities or qualification to hold a job and no money for medical insurance at a time when health is going to be an issue at their age.

Gary Gillis a retired fire chief of the city stated, “All that is left is sadness. Stockton has the most good, solid, down-to-earth people you’ll ever meet. And now things are going to get even harder for many of them.” Hopefully, Stockton will be able to pull itself out of this financial rut and rise again and not end up like a ghost city in Michigan.

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