Stockton, California filed
bankruptcy after talks with bondholders and labor unions failed,
making the agricultural center the biggest U.S. city to seek
court protection from creditors. The city of 292,000 listed assets of more than $1 billion
and debt of $500 million to $1 billion in court filings
yesterday in U.S. Bankruptcy Court in Sacramento, California.
The two biggest creditors named in the filing reflect the groups
most likely to face cuts imposed as part of the bankruptcy:
bondholders and city employees. Stockton said its biggest unsecured creditor is the
California Public Employees’ Retirement System, or Calpers, ,
the largest U.S. pension fund, owed $147.5 million, followed by
Wells Fargo Bank NA, as trustee for $124.3 million in pension
obligation bonds, and Wells Fargo as trustee for three other
sets of bondholders owed $107 million, according to court
papers. “We are extremely disappointed that we have been unable to
avoid bankruptcy,” Mayor Ann Johnston said in a statement.
“This is what we must do to get our fiscal house in order and
protect the safety and welfare of our citizens. We will emerge
from bankruptcy with a solid financial future.” The Chapter 9 filing allows the city to suspend payments to
creditors while it seeks court approval for a plan that balances
its revenue with its debt. The budget for the fiscal year
beginning July 1 calls for defaulting on $10.2 million in debt
payments and cutting $11.2 million in employee pay and benefits
under union contracts that could be voided by the bankruptcy
court. “Citizens will not see any changes in service after July
1” the city said in a statement yesterday, referring to the
date that a new budget will be in place.(more)
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Why Stockton, California, Is Bankrupt, And Your Town Isn't
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