Guillermo and Betty Garcia stand in their downtown Stockton, Calif., clock and jewelry shop Wednesday, June 27, 2012. Garcia said the Stockton bankruptcy will have a trickle effect on residents and business owners, including a rise in crime and more businesses going belly up. (AP Photo/Gosia Wozniacka)
STOCKTON, Calif. (AP) — When Stockton becomes the largest U.S. city ever to file for bankruptcy, it will strike a hard blow to residents, especially city employees and retirees whose health benefits and pensions helped drive the city toward insolvency.
City Manager Bob Deis said late Tuesday that officials were left with little choice but to recommend bankruptcy after failing to hammer out deals with creditors to ease the city’s $26 million budget shortfall.
Deis expects the city to file for Chapter 9 protection by Friday.
Stockton will join a number of other cities and counties across the nation that have plunged into financial crisis as the recession made it tough to cover rising costs involving current and former employees, bondholders and vendors.
“What’s going on in Stockton is endemic to what’s going on all over the state and the country,” said Michael Sweet, a San Francisco bankruptcy attorney at Fox Rothschild LLP. “Local governments are hurting and strained under the current pension and compensation systems. These systems are not appropriate for the type of economy this country has evolved into.”
At a standing room-only Stockton City Council meeting Tuesday, numerous former city employees talked about their life-threatening Login to read more