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June 27, 2012

Chickens Come Home To Roost: Largest Municipal Bankruptcy In US History Set To Be Filed Today

Stockton, California...busted.

The budget for the fiscal year beginning July 1 calls for defaulting on $10.2 million in debt payments and cutting $11.2 million in employee pay and benefits under union contracts that could be voided by the bankruptcy court. The city of 292,000 may file its petition as soon as today.

...

The city has cut services so much the last two years that “public safety is at a crisis level,” officials said in a June 5 fiscal report. Unemployment, at 15.4 percent in April, was almost double the national average according to the U.S. Department of Labor.

Stockton ranked third in murders last year among large California cities, behind Los Angeles and Oakland, according to FBI data.

The collapse of the housing market left Stockton to contend with mounting retiree health-care costs and eroding tax dollars in the wake of the recession, amid accounting errors that overstated municipal revenues. One in every 195 homes in Stockton’s metropolitan area received a foreclosure filing in May, the fifth-highest rate in the U.S., according to RealtyTrac Inc.

If it's any consolation to Stockton, they probably won't be the biggest municipality to file for bankruptcy for long.

I bet the bondholders, workers, retirees and residents wish they had gotten their own Chris Christie or Scott Walker a few years back. Lower pay and benefits > no pay and benefits.


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posted by DrewM. at 12:32 PM

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