Stockton City Council expected to approve bankruptcy tonight
The Stockton City Council is expected to vote Tuesday night to become the largest U.S. city to ever file for protection from creditors under the U.S. Bankruptcy Code.
There was no midnight reprieve for the city, which was negotiating with 18 creditors. An 11:59 p.m. Monday deadline came and went with no announcement of a breakthrough.
The working-class port city -- where much of California's agricultural exports set sail -- lived large on credit during the boom. The city borrowed millions of dollars for ambitious, eye-catching projects in the mid-2000s. Up went a sports arena, hotel and promenade. The city booked a Neil Diamond concert as a kickoff to better times. Houses in sprawling tracts sold quickly and with high mortgages.
When the bust came, few places fell as hard as Stockton. It has the second-highest rate of foreclosures in the country. Property tax money dried up.
In a desperate effort at solvency, the city made $90 million in drastic cuts from the general fund in the last three years, including reducing the Police Department by 25%, the Fire Department by 30%, and cutting pay and benefits to all employees.
The employee unions -- especially Stockton's police union, fought. The police union paid for billboards keeping a running tally of the city's high rate of homicides and calling to stop "laying off cops."
Last year the city set a record for violence with 58 homicides. Last week, Stockton police investigated the 30th homicide of 2012 -- more than double at the same time last year.
As of July 1 the city will still face a $26-million shortfall.
City Manager Bob Deis said bankruptcy could protect against further cuts to public safety.
"If we file for Chapter 9 protection it is because the City Council wants to protect services," he said in a press release.
The confidential mediation process that ended Monday night was under AB 506, a new California law designed to slow municipal bankruptcies, and has been closely watched by other debt-ridden local governments.