It's official: the Californian city of Stockton – which is facing a projected $26m budget shortfall – will become the nation's largest city to file for bankruptcy, the Los Angeles Times reported.
The move comes after council members on Tuesday night voted in favor of a budget through which the city, which lies about 85 miles east of San Francisco, in the Central Valley, would seek protection under the US bankruptcy code.
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In line with a California law that requires a mediation process before a municipality can seek to reorganize its debt, Stockton has been in negotiations with creditors since March, the LA Times reported – adding that observers sitting in on the meetings described them as “torturous and tedious.”
For several months now, officials in Stockton, a city of 300,000 people, have warned that increasing debt, poor fiscal management spanning decades, and overly generous pay for city employees and retirees has crippled its finances, Reuters reported.
Mayor Ann Johnston described the bankruptcy decision as “heart-wrenching,” but said there was no other solution for Stockton, which suffered severely during the housing market crash
City manager Bob Deis said he expected to file bankruptcy papers as soon as today, after the budget was adopted following a tense, five-hour council meeting that marked the end of the mediation process.
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Retired city workers, afraid at not being able to afford their healthcare insurance, attended to the meeting in vain efforts to lobby council members to reject the budget, which proposes eliminating their medical benefits, Reuters reported.
Other residents wanted to present for a moment that many felt was a long time coming. Dwight Williams, who runs a nonprofit housing organization, told the LA Times: "It's a seminal moment in this city's history and I needed to be here ... I can't just read about this in tomorrow's paper.