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April 02, 2013
Stockton, Calif. enters bankruptcy, largest municipality to go bust
Judge allows California city to enter bankruptcy, largest municipality to go bust
Stockton, Calif., became the most populous city in the nation to go broke Monday, after a judge accepted the city's application to enter bankruptcy.
In the closely watched decision, U.S. Bankruptcy Judge Christopher Klein said the bankruptcy declaration was needed to allow the city to continue to provide basic services. He determined Stockton would not be able to perform "its obligations to its citizens on fundamental public safety as well as other basic government services without" the protections provided under bankruptcy proceedings.
Stockton was facing a $26 million shortfall when it filed for bankruptcy last summer, the result of the housing bust and soaring pension obligations. After cutting a quarter of their police force and other city services to the bone, officials argued bankruptcy was their only option.
The city of nearly 300,000 people has become emblematic of government excess and the financial calamity that resulted when the housing bubble burst.
Its salaries, benefits and borrowing were based on anticipated long-term developer fees and increasing property tax revenue. But those were lost in a flurry of foreclosures beginning in the mid-2000s and a 70 percent decline in the city's tax base.
The city's creditors wanted to keep Stockton out of bankruptcy -- a status that would likely allow the city to avoid repaying its debts in full.
They argued the city had not cut spending enough or sought a tax increase that would have allowed it to avoid bankruptcy.
Matthew Walsh, an attorney for the bond holders, declined to comment after Monday's ruling.
Attorneys for the city said the city's budget and services had been cut to the bone.
"There's nothing to celebrate about bankruptcy," said Bob Deis, Stockton's city manager. "But it is a vindication of what we've been saying for nine months."
Wild Thing's comment.................
Too much spending and still they will not admit it.
Posted by Wild Thing at April 2, 2013 12:40 AM
Comments
This may start a stampede of cities around the country(blue states primarily)filing for bankruptcy. Large cities like Detroit, Gary, Los Angeles, Philidelphia are broke and existing on borrowed time as well as borrowed money.
Posted by: TomR,armed in Texas at April 2, 2013 11:37 AM
