Stockton becomes largest U.S. city to seek bankruptcy protection
Stockton on Tuesday night became the largest city in the country to fail after the City Council halted bond payments, slashed employee benefits and adopted an emergency budget in the wake of the failure of mediation talks with creditors.
City Manager Bob Deis likened the process to cutting off an arm to save the body. He is expected to file bankruptcy papers immediately.
Residents gathered hours early for the 5:30 p.m. meeting. Most knew what the night held; bankruptcy has been 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 slow progress have titled their report on it “Death by a Thousand Meetings.”
Mediation ended Monday at midnight.
Recent council meetings have been boisterous and contentious. Tuesday night's meeting was quieter, with an evident sadness on faces in the packed audience. Many residents said they were there mostly to hear for themselves that the day so long expected had finally come.
“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 if municipal bankruptcy proves medicine or poison.
-- Diana Marcum in Stockton