"Every local elected official should be paying close attention to what is happening in the city of Stockton today. Our neighbor to the north, California's 13th largest city with a population of approaching 300,000 people, is flirting with bankruptcy. The City Council is expected to approve an eight-point plan this evening that calls for the city to suspend approximately $2 million in bond payments through the end of the current fiscal year. The plan also calls for the city to embark on two months of private discussions with its bond holders, city employee unions and any other creditors with at least $5 million in claims against the city to determine if parties can reach accommodations that will allow Stockton to avoid bankruptcy. If the council agrees — and it really has no other viable option — Stockton will become the first city in the state to undergo the AB 506 process, a formalized mediation period designed to help jurisdictions restructure their debts and avoid municipal bankruptcy."
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This is a grim situation, obviously. As the headline points out, Stockton's unemployment rate is almost 16% and they are second only to Las Vegas in their foreclosure rate. It is hard to see how this city can strike a deal that will hold off Chapter 9 proceedings for very long.
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