Stockton, California, Files for Bankruptcy Protection
The California city of Stockton filed a petition seeking U.S. bankruptcy court protection after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors.
A river port about 80 miles (130 kilometers) east of San Francisco, Stockton ran out of options after three months of negotiations with creditors ended June 25 without enough concessions to close a $26 million deficit.
The city listed assets of more than $1 billion and debt of $500 million to $1 billion in court filings today in U.S. Bankruptcy Court in Sacramento, California.
“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 Stockton, a city of 292,000, 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.