Stockton braces for possible bankruptcy as key vote looms

[WestVirginiaRebel]

Los Angeles Times:

Stockton residents braced for a fateful City Council meeting on Tuesday night that could result in the city declaring bankruptcy.

The prospect of insolvency was generating national headlines Tuesday.

But on the Central Valley city's largely African American south side, the spectre of Stockton becoming the largest U.S. city to file for protection from creditors raised little interest.

"Bankrupt? We've been bankrupt," said the Rev. Dwight Williams of the New Bethel Baptist Church.

"This church works day and night to pay the PGE bill and keep the lights on. So many in our congregation have lost homes and jobs.

"But it's in our DNA to take the bitterness of lemons and made sweet lemonade. We remain optimistic and we will continue to take care of one another but I think most people around here would laugh if you said Stockton was going to be bankrupt.

The Stockton City Council will discuss whether to seek protection from creditors under the U.S. Bankruptcy Code.

The working-class port city -- where much of California's agricultural exports set sail -- lived largely on credit during economic boom times. The city borrowed millions of dollars for ambitious, eye-catching projects in the mid-2000s. Up went a sports arena, hotel and promenade. The city booked a Neil Diamond concert as a kickoff to better times. Houses in sprawling tracts sold quickly and with high mortgages.

When the bust came, few places fell as hard as Stockton. It has the second-highest rate of foreclosures in the country. Property tax money dried up.

In a desperate effort at solvency, the city made $90 million in drastic cuts from the general fund in the last three years, including reducing the Police Department by 25%, the Fire Department by 30%, and cutting pay and benefits to all employees.

As of July 1 the city will still face a $26-million shortfall.

City Manager Bob Deis said bankruptcy could protect against further cuts to public safety.

"If we file for Chapter 9 protection it is because the City Council wants to protect services," he said in a press release.

The confidential mediation process that ended Monday night was under AB 506, a new California law designed to slow municipal bankruptcies, and has been closely watched by other debt-ridden local governments.

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California's domino effect begins?

[Valin]

@WestVirginiaRebel

 

We are seeing the end of the Blue Social Model.