Stockton bankruptcy: Will other cities follow?
This post has been corrected. Please see note below.
Join the Times' state correspondent Diana Marcum and City Editor Shelby Grad for a discussion about the latest developments in Stockton, which is moving to become the nation's largest city to seek protection under the U.S. Bankruptcy Code.
The chat is scheduled for 9 a.m. Wednesday.
At a City Council meeting Tuesday, Stockton City Manager Bob Deis likened the process to cutting off an arm to save the body. He is expected to file bankruptcy papers immediately.
Many residents gathered at the meeting -- even though they knew what was 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." Mediation ended Monday at midnight.
"It's a seminal moment in this city's history and I needed to be here," said Dwight Williams, who runs a nonprofit housing organization. "I can't just read about this in tomorrow's paper. I need to hear for myself if there is some inkling as to where we go from here."
Experts say there are no clear answers to what comes next for Stockton or how its fall will affect the rest of the state. Other cities hit hard by the housing bust and state budget crisis are negotiating with employee unions for concessions and are watching to see whether municipal bankruptcy proves medicine or poison.
Los Angeles bankruptcy attorney Karol Denniston told the Associated Press the bad economy, foreclosures and future pension obligations have created "the perfect storm."
"Nationwide, we're faced with a ton of municipal distress," Denniston said.
[For the Record, 8:45 a.m. June 27: An earlier version of this post incorrectly attributed Karol Denniston's interview to CNBC. Denniston made the statements to the Associated Press.]