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Cars drive through downtown Stockton April 29, 2008 in Stockton, California. As the nation saw widespread home loan foreclosures, Stockton, .California led the nation with the highest foreclosure rate. One out of every 30 homes in Stockton is in foreclosure, close to seven times the national average for a metro area in the U.S.
Stockton’s city council will meet tonight to discuss the California city’s financial future. The economically burdened city faces the end of mediation, which came under a new state law requiring municipalities to negotiate with creditors and avoid bankruptcy.
With a population of nearly 300,000 people just 85 miles east of San Francisco, Stockton would have to win concessions with its 18 creditors to close its $26 million shortfall. By law, California would need to have a balanced budget by the beginning of the fiscal year on July 1.
After talks with its creditors on Monday night, the city found its options limited and may resort to filing for bankruptcy. This was an option city officials had considered since February. If the city on the San Joaquin River does declare bankruptcy, it will not only have the nation’s second highest foreclosure rate but also be the biggest U.S. city to go broke.
So far, Vallejo, California is the largest U.S. city to file for bankruptcy. The city has half the population of Stockton.
Tonight’s proceeding will be telecast live on Stockton’s website.
Do you think Stockton will declared bankruptcy tonight? What would be the implications? How do you think it will affect California’s economy?
Richard Brodsky, a former 14-term New York State Assemblyman from Westchester who is helping the city of Yonkers through similar fiscal issues, has written articles on municipal bankruptcies, and is a Senior Fellow at the Demos foundation
Deborah Lauchner, finance director, Vallejo, CA; she has been the finance director for the past year