The city of Stockton, Calif., is poised to become the largest U.S. city
to declare municipal bankruptcy, after a deadline to make a deal with
creditors passed Monday night.
The city council is expected to announce tonight whether or not an agreement was reached.
Stockton Mayor Ann Johnston told Stockton's KCRA television station that a bankruptcy filing is "very likely."
The decision will be the culmination of years of growing
budget deficits, as Stockton struggled with the collapse of the housing
market. The problems were compounded by expensive city investments —
including a promenade, a sports stadium, and a hotel — as well as the
growing costs of the city's labor contracts and generous pension plans
for retired city workers.
Over the past three years, the city has eliminated
one-fourth of it's police force, one-third of the fire department, and
40% of the rest of the municipal workforce to close a 90% budget
deficit, according to the Associated Press,
For the past three months, Stockton officials have been
negotiating with creditors to reach a financial settlement, but the
deadline to reach an agreement passed on Monday. The city is insolvent
and facing a $26 million budget deficit.
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