The city council of Stockton, California votes tonight on whether the city of 290,000 will seek Chapter 9 bankruptcy protection:
Stockton residents braced for a fateful City Council meeting on Tuesday night that could result in the city declaring bankruptcy.
The prospect of insolvency was generating national headlines Tuesday.
But on the Central Valley city’s largely African American south side, the spectre of Stockton becoming the largest U.S. city to file for protection from creditors raised little interest.
“Bankrupt? We’ve been bankrupt,” said the Rev. Dwight Williams of the New Bethel Baptist Church.
“This church works day and night to pay the PGE bill and keep the lights on. So many in our congregation have lost homes and jobs.
“But it’s in our DNA to take the bitterness of lemons and made sweet lemonade. We remain optimistic and we will continue to take care of one another but I think most people around here would laugh if you said Stockton was going to be bankrupt.
The Stockton City Council will discuss whether to seek protection from creditors under the U.S. Bankruptcy Code.
Stockton faces many of the same problems that cities, counties, and states do all over the United States but particularly in California. Its business plan depends on the revenue from property taxes and retail sales taxes rising faster than its past and present public employees’ healthcare expenses. That’s not a good assumption.
According to other stories, real estate values quadrupled from 2000 to 2006. I think the LATimes is playing up a poverty angle, when it sounds more like an extended drinking binge on a lottery ticket.
It looks to me like the scary problem is the retiree benefits:
“Milnes said a legal fight over pensions would prove costly for Stockton and complicate any bankruptcy case.
“Do you want to be on the bleeding edge or on the cutting edge?,” he asked. “If you want to take this thing on you could stretch your bankruptcy on for years and take on more cost.”
Stockton runs its own retiree medical program, making it a far easier to target for costs savings, McLaughlin noted.
Stockton officials have repeatedly said the city faces a crushing liability of $417 million for its retiree medical expenses and that those costs must be reined in.
In its statement Wednesday, the city also contended that altering pensions would make it “nearly impossible” to recruit and retain good employees, but that cutting healthcare benefits would not have such consequences.
The extent to which government employers in California may alter pensions for current employees is the central issue in a lawsuit launched by police officers in San Jose this month following voter approval of a measure to overhaul the city’s pensions. San Jose’s firefighters also have launched a court challenge to the measure.”
http://www.msnbc.msn.com/id/47919864/ns/business-us_business/t/stockton-bankruptcy-likely-be-costly-mess/
The link also indicates that the City of Vallejo has recently emerged from bankruptcy with similar cuts, but since then “crime has soared, businesses have fled and property values have plunged as the city struggles to maintain basic services.”
Federalizing city + state pensions + medical in return for all new city and state employees being strictly defined contribution is a fiscal stimulus I could get behind.
oops I re-read your post and don’t mean to federalize current employee’s medical, just retired