06/29/2012 03:55:00 PM EST
City Of Stockton, Calif., Files For Bankruptcy, Citing $26 Million Deficit
SACRAMENTO, Calif. - The City of Stockton, Calif., last night filed its Chapter 9 bankruptcy petition in the U.S. Bankruptcy Court for the Eastern District of California, becoming the largest city in the country to file for bankruptcy after months of anticipation that insolvency was imminent once negotiations with its creditors failed to address a $26 million budget deficit (In Re: City of Stockton, California, No. 12-32118, Chapter 9, E.D. Calif. Bkcy.).
On June 26, the Stockton City Council approved a budget that prepared the way for the bankruptcy petition, and city officials indicated that a petition would be filed before the end of the week. The city has a population of 292,000.
The city said that over the last three years, it addressed its budget deficit of $90 million through a reduction in employee compensation and the elimination of various programs and services but that the remaining $26 million deficit had to be resolved through bankruptcy. Furthermore, three months of negotiations failed to produce a comprehensive set of agreements between the city and its largest creditors that would help prevent the need for bankruptcy, the city said.
The city insists that it is authorized to file for Chapter 9 bankruptcy pursuant to California Government Code Section 53760 and 11 U.S. Code Section 109(c).
The creditors with the 20 largest unsecured claims the city lists are: California Public Employees Retirement System, with a claim of $147.5 million; Wells Fargo Bank, with six separate claims totaling $221.29 million; Howard Jarvis Taxpayer Association, with a claim of $31.64 million; the State of California, with a claim of $10,837,363.08; CC Meyers Inc., with a claim of $18,436,411.36; RGW Construction Inc., with a claim of $16,525,615.78; PB Americas Inc., with a claim of $3,855,237.59; CDM Constructors Inc., with a claim of $3,494,569.03; Vascorp Investments Corp. Inc., with a claim of $3,095,241; Preston Pipelines Inc., with a claim of $2,592,553.20; Spanos Family Trust, with a claim of $2,502,800; Granite Construction Inc., with a claim of $1,656,205.26; Pacific Gas & Electric, with a claim of $1,653,124.55; Wells Fargo International Securities, with a claim of $1,526,951,51; and a $1,455,000 claim as part of a lawsuit pending against the city.
The city is represented by Marc A. Levinson of Orrick Herrington & Sutcliffe in Sacramento.
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