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Stockton council weighs plan to forestall city's insolvency

Residents pack hearing as city officials, in uncharted territory, debate a last-ditch effort to avoid becoming California's largest municipality to file for bankruptcy.

February 29, 2012|By Diana Marcum, Los Angeles Times

Reporting from Stockton -- The Stockton City Council met until late Tuesday to vote on a contentious proposal that could forestall the port city's slide toward insolvency.

Their moods shifting from intense to despondent, residents of the Central Valley city packed the upstairs council chambers, ground floor and outside stairs as members debated the last-ditch effort to avoid becoming California's largest city to file bankruptcy.

City Manager Bob Deis introduced a complex explanation of the plan by noting it was uncharted territory. "I thought I'd saw it all ... but I'm here to tell you I was wrong," Deis said.

"It's discouraging; it's upsetting, scary, all of those things," said Megan Escudero, 47, a social services worker who said her own family had suffered from the city's fiscal crisis. "Things have been tough but we hang on. We never considered bankruptcy."

If it approves the proposal, Stockton would be the first city in California to resort to a recently enacted state law designed to slow a municipal bankruptcy filing and protect union paychecks.

Under AB 506, parties including those who hold debt in the form of bonds and employee unions whose paychecks depends on city revenue sit down to work out deals with a neutral evaluator, most likely a retired bankruptcy judge.

The bill by Bob Wieckowski (D-Fremont), a bankruptcy attorney, was criticized by municipalities as pro-union. But Wieckowski said it was designed to help cities avoid lawsuits if they do go into bankruptcy.

"No one knows what a garden-variety municipal bankruptcy looks like," Wieckowski said. "This gets all the players in one room to put deals in place and admit that in a situation like this there are no winners, baby."

Wieckowski likened this to the decision of trying to work out a deal with a home's mortgage lender or just walking out, a scenario painfully familiar to residents of Stockton, which has the highest foreclosure rate in California, and among the highest in the nation..

"But a city has nowhere to go," Wieckowski said. "They can't walk."

City Hall is within walking distance of an expansive waterfront redevelopment the city built on the promise of future revenues that never appeared. Part of the mediation process is to analyze blame for the downfall.

Residents were eager to take to the podium to offer their take on what went wrong, in turn blaming multiple Wal-Marts, or the city's grant of free rent to a fancy restaurant.

Many speakers begged the council to avoid bankruptcy, and the mediation process that they consider a precursor to filing. But most understood that by June, Stockton could default on more than $2 million in bond debt for this financial period.

Stockton resident Kelliann Vickeroy confessed ignorance of the proposal, which ran 141 pages inside a 450-page council agenda, but was sure it would make her life more difficult.

"I work seven days a week, two jobs waiting tables in Stockton," she said. "I know all this is going to affect my job prospects, and everything I enjoy in Stockton: the libraries, the waterfront. But I'm just too tired to keep up."

diana.marcum@latimes.com

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