Stockton, Calif. is now is the largest city in the U.S. to file for bankruptcy protection, after struggling with the economic downturn, pension costs and contractual obligations. The city has also been hit by high crime and the collapse of the housing market in the past three years.
During the 2008 home foreclosure crisis, Stockton led the nation with the highest foreclosure rate. One out of every 30 homes in Stockton was in foreclosure at the time, close to seven times the national average for a metro area in the U.S.
Stockton City Manager Bob Deis said officials were left with little choice but to recommend bankruptcy to address the city's $26 million budget shortfall. "Unfortunately we have no comprehensive set of agreements with our creditors that would eliminate the deficit and avoid insolvency," Deis said at the Stockton City Council meeting Tuesday night. "We think Chapter 9 [bankruptcy] protection is the only choice left," Deis said. "If we get any agreements, those will be honored in Chapter 9."
Peter Navarro, Professor of Economics and Public Policy at UC Irvine.
The Associated Press contributed to this report