conundrum bullheadedness: Stockton, California to file for bankruptcy

Sunday, July 1, 2012

Stockton, California to file for bankruptcy

by Elizabeth M Young

Created on: June 29, 2012

Stockton?California nestles in the middle of the Sacramento Valley, about 80 miles (103 km) east of San Francisco, California. Stockton is one the terminal ports for the Sacramento Valley Delta. The city is surrounded by vast agricultural fields and delta waterways with views that seem to change every mile or two. From grapevines to dairies, this part of the central valley produces vast amounts of food, including asparagus. Stockton boasts one of the most

artistic skylines ever seen. The agricultural center and port city is known for its robust and sprawling Asparagus festival. Now, Stockton will be remembered for being the largest city in the United States to file for bankruptcy.

According to KCRA 3, the city filed for Chapter 9 bankruptcy on Thursday in Sacramento Federal Court. The city had a $26 million budget shortfall and failed to work out hundreds of millions of dollars in issues with creditors.?A new state law is designed to help municipalities avoid bankruptcy, but even that law could not help Stockton.

Municipal retirees will have to foot more of the bill, if not the entire bill for their medical insurance. This is because of CALPERS, the nations fattest retirement perks system. The bankruptcy plan also hopes to suspend bond payments, payment for claims, and long-term debt payments that would be paid from the general fund.?

Residents will not see changes in services as Stockton joins many other cities in the nation that cannot keep up with old and current debts, pension and retirement perks, and rising costs.?

According to Bloomberg,

"The city of 292,000 listed assets of more than $1 billion and debt of $500 million to $1 billion in court filings yesterday in?Sacramento, California. The two biggest creditors named in the filing reflect the groups most likely to face cuts imposed as part of the bankruptcy: bondholders and city employees."

The $500 million to $1 billion debt load came as a shock to many, including those in the media, because city officials had not released that information.

CALPERS, or the California Public Employees Retirement System is listed as one of Stockton's biggest creditors. CALPERS is the largest pension fund in the U.S. Wells Fargo Bank was the largest creditor since the bank is trustee for $123 million in pension obligation bonds. Wells Fargo also serves as trustee for three large bondholders with bond debt?totaling?$107 million.

From here, the final outcome of Stockton's bankruptcy filing will depend on the deal-making and court decisions that will take some time to come.?

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