Watch CBS News

UPDATE: Stockton Files For Bankruptcy In Sacramento Federal Court

STOCKTON (CBS13) - On Thursday, Stockton filed for Chapter 9 bankruptcy protection with a Sacramento federal court, becoming the largest U.S. city to do so.

City leaders were unable to reach an agreement with creditors on $26 million in debt. It had a deadline of midnight Monday. It must pass a balanced budget by July 1, so the city voted 6-1 late Tuesday night on a pendency plan for a day-to-day operating budget as it moves forward with bankruptcy. Only Councilman Dale Fritchen opposed.

"I am not convinced there isn't anything else we can do," Fritchen said before the vote. "We keep our promises until we can't. We haven't done everything."

The city is expected to officially file for bankruptcy in federal court some time this week.

"This is the most difficult decision I have ever had to make as an elected official," Mayor Ann Johnston said as the council prepared to vote on the pendency plan late Tuesday night.

The city's decision to file for bankruptcy prompted dozens of critical remarks from citizens earlier during the public comment portion of Tuesday's packed meeting at City Hall.

"The pendency plan is a death sentence to some and to others it's an unavoidable slap in the face," Joni Anderson said.

"The world is watching so they can see we are victims of a society that is failing us," one said. "I would like to express my empathy for all those affected by tonight's decision to be made in City Hall. Though I do not in any way shape or form even understand why it's being done, I do believe we must accept it because we have obviously no power to control it. Our leaders do not respect us, nor do they listen to us."

"What is wrong with you people?" another asked the council. "Do you even care?"

"You failed," said another resident. "You failed this city and you failed all of these people."

In the past three years, officials in the port city of 292,000 that was slammed by the collapse of the housing market dealt with $90 million in deficits through a series of drastic cuts to police, firefighters and other city staff.

"Absolutely never expected it. Nobody does," Mayor Ann Johnston said before Tuesday's meeting. "Circumstances being what they are, you make the best of whatever situation you find yourself in."

Johnston has been involved in the community as a business owner and council member for several years. She never thought she'd be the one at the helm of a city faced with bankruptcy.

"It makes me frustrated because the council and I have worked hard to avoid this situation. We have done everything, made some tough situations," she said. "Our goal is to leave Stockton a better place when we leave office than we found it."

Instead, city leaders find themselves in worse shape than ever.

Johnston says cuts are no longer an option because they've eliminated 25 percent of the city's police officers, 30 percent of fire staff and nearly half of all other employees.

After making national headlines, reporters from Europe have converged on Stockton to look for similarities between its money woes and cities abroad.

One thing is certain, bankruptcy is a black eye the city doesn't need.

"Our image has taken a beating over the last few years," the mayor said. "My hope is we come out of it very quickly if we have to file and show the world we can manage our finances, we can have a solid future."

To plug next year's anticipated $26 million budget shortfall, a proposed budget to be considered Tuesday night would suspend payments for debts and legal claims; reduce payments for retiree medical benefits; further cut some pay and benefits; and increase revenue through code enforcement and parking citations.

The proposed budget includes no major service reductions, City Manager Bob Deis said.

"The whole purpose of filing Chapter 9 is to avoid an uncontrolled chaotic situation," Deis said previously. "Bankruptcy provides the equivalent of a pause button. It retains services and provides structure so you don't have a bunch of lawsuits."

(The Associated Press contributed to this story.)

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.