STOCKTON, CA — “Contrary to what you have read about, Tuesday is to begin the AB 506 process, we are not asking city council to file chapter 9 [bankruptcy],” explained Stockton’s City Manager, Bob Deis, during a closed press conference the morning of Friday, February 24, 2012 at the Council Chambers.
The press conference was in response to speculation that the city may file bankruptcy. A day prior, on Thursday, February 23rd, the two year bankruptcy conversation augmented its tone and it seemed a closer reality as The Record published “Stockton bankruptcy first step likely,” a story in which it was noted that, “City Council on Tuesday is expected to take its first step toward filing for bankruptcy in a dramatic move to remedy Stockton’s crippling finances.”
“There is no one event, no one decision or any one-person to attribute Stockton’s financial situation,” Deis commented, continuing to state that, “it’s an accumulation of things that have occurred in the last 20 years.”
Specifically, Deis highlighted “an unsustainable retiree program which started in 1990s,” which he called, “one of the most generous retirement programs in the State or Nation.” He continued explaining that in the early part of the century, “the city issued a lot of debt — 319 million dollars.” Deis said that these issues were compounded when the city adopted unsustainable labor contracts, when the State passed on their budget issues to the cities, and because of the impact of the recession, foreclosures, unemployment, and poor fiscal management over time.
The city anticipates a deficit of a minimum of 20 million dollars in the upcoming fiscal year.
“We cannot continue to degrade our community and degrade our city by continuing to reduce our services,” Deis noted. “We’ve got to share the burden among creditors.” On Tuesday, February 28th, Deis will seek city council’s approval to further research options to address the city’s financial situation by granting the authority, “to suspend certain payments” and “to renew the two year declaration of Stockton’s fiscal emergency.” Additionally the city will attempt to implement measures to correct bookkeeping, make adjustments to the upcoming budget, and to authorize financial restructuring as allowed by Assembly Bill (AB) 506, a new California law on municipal bankruptcies.
AB 506 will allow a mediator to meet with stakeholders and city representatives to negotiate solutions outside bankruptcy.
City council will be hearing the administration’s strategy at the Council’s Meeting at 5:30 p.m. on Tuesday February 28th. It is anticipated that union members and concerned citizens will oppose bankruptcy.
The next City Council will meeting will be held on Tuesday, February 28, 2012 to discuss this further.