STOCKTON - Officials in this struggling city made the case Tuesday for their plan to exit bankrupty, saying the brunt of the burden will be shouldered by taxpayers and municipal employees and retirees.
City Manager Bob Deis, speaking to reporters at City Council chambers, acknowledged the plan rests heavily on a 3/4-cent sales tax increase thats on the November ballot.
We need new taxes; without it, were in trouble," Deis said. Without the tax hike, "Stockton is not a viable city anymore."
He predicted the city would have to close its library system and recreational programs, and impose deeper cuts to its fire department. The Stockton plan, first unveiled late Friday, makes no cuts in the city's annual contribution to CalPERS - confirming the stance that the city has taken since filing for Chapter 9 bankruptcy last year. The city's bondholder creditors had earlier complained that CalPERS was getting preferential treatment but have softened their stance in the months since a U.S. bankruptcy judge in Sacramento rejected their plea to have the bankruptcy case thrown out of court, Deis said. That ruling, in April, helped get the parties together, he said.
The plan calls for the bond creditors to forfeit about $16 million a year in debt payments, Deis said. However, the city hasn't finalized agreements with some of the bond creditors, and a court fight might be ahead. If deals can't be struck, the city will ask the court to impose a so-called cram-down on the recalcitrant creditors, he said. Weve done enough negotiating, its time to have a deadline, Deis said.
At the time it filed for Chapter 9 last year, Stockton was the largest city in America to go bankrupt. It has since been surpassed by Detroit, and Deis took pains to differentiate Stockton's situation from Detroits. With new taxes and continued fiscal discipline, we are going to be a going concern, he said. The bankruptcy plan is to be voted on by the City Council on Thursday. The citys reorganization plan represents $167 million in restructuring, including massive cuts to city services, reduced employee and retiree compensation, higher taxes and the cuts to bondholders.
The Stockton bankruptcy had shaped up as a war between CalPERS and the bond creditors, a fight that the city was eager to avoid. Deis said the city had no choice but to continue making full payments to CalPERS. The alternative would be to reduce pension benefits by an estimated two thirds, plunge retirees into poverty and watch existing employees flee at a time when the city is trying to beef up its beleaguered police force. Therell be a mass exodus of those employees and we wont be able to fill those positions," Deis said. One of the chief bond creditors, National Public Finance Guarantee, has made an agreement with the city. The city is close to making a deal with the other, Assured Guaranty. Together they represent more than $240 million in bond debt.
Were pleased to have reached a settlement agreement with the city of Stockton that should expedite its exit from bankruptcy, National Public spokesman Kevin Brown said by email.
Call The Bees Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler