Stockton official: Mediation with creditors fails
In opting to become the nation's largest city to seek federal bankruptcy protection, this river port of 290,000 took a rare financial step of last resort after struggling with the economic downturn, soaring pension costs and contractual obligations.
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#1 Jun 27, 2012
Gerry Moonbeam will not be very happy about this news but hey, he's just a dumb governor who knows nothing about our problems.
New California Law Makes Municipal Bankruptcy Harder
October 19, 2011
By: Brenna Working
California Governor Jerry Brown signed a bill into law this weekend that will add hurdles to municipalities filing for Chapter 9 bankruptcy in California. The bill was apparently the third of its kind that has been proposed in the three years since Vallejo's 2008 bankruptcy filing, according to the L.A. Times.
Also since Vallejo sought bankruptcy protection, several other California townships and cities have reportedly threatened similar action, citing unmanageable debts and unsustainable contracts with city employees.
One of the modifications Vallejo made in its bankruptcy case was to contracts with firefighters and other public employees in the city. By limiting their pay and benefits, the city was apparently able to save serious money. But the move rankled labor unions across the state, which spurred the introduction of bills similar to the one signed into law this weekend.
The new California bankruptcy law (known as AB 506 in the state legislature) requires municipalities considering Chapter 9 bankruptcy to complete a financial evaluation by a neutral third party. If the neutral body deems the city in need of bankruptcy protection, the city can file.
Alternately, cities may qualify for bankruptcy by declaring a state of fiscal emergency, meaning that they will default on their bills within 60 days unless they enter bankruptcy protection. According to Jerry Browns web site, the goal of the new law is to push cities to seek "less dramatic" alternatives to bankruptcy protection whenever possible.
Labor unions will likely be happy with the bill. In bankruptcy, many cities save money by renegotiating labor contracts, and unions' power in such negotiations is significantly diminished.
#2 Jun 28, 2012
This is really tragic and it will be a much rougher and more difficult, violent bankruptcy than Vallejo's.
Stockton was a nice old town fifty years ago. Sad.
#3 Jun 28, 2012
It will be interesting when the STATE of California has to declare bankruptcy.
Feds should not bail out one single state (or they will get to bail out all 50). States will need to control their own system to get where they need to and get obligations and spending under control.
As JB raises taxes on the rich and buisness they will leave for lower taxes and easier regulations in other states (thus lower the tax base even more). The one good thing is this is one time the politician that helped get CA to this position (J. Brown) is now having to deal with his past decisions. Got to love those IOUs the state likes to issue.
Walker got it right (and WI is headed toward black ink after being deep in red ink) and CA is getting wrong (and is heading deeper into the red ink). Head in the sand does not work.
When the well is totally dry it does not really matter what you were promissed.
#4 Jun 28, 2012
I'd be interested to see just how the new law will protect the labor unions from re-negotiations as designed by Jerry Brown. It seems the taxpayers are becoming the hostage in this drama because city will be obliged to keep paying for salaries it can't afford and the only solution will be to raise more taxes.
Like the news stated, labor unions will be happy with Jerry's help in return for political support.
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