On June 28, 2012, the City of Stockton filed a petition for protection under chapter 9 of the
United States Bankruptcy Code. Today, February 25, 2015, the City’s Plan of Adjustment
or “bankruptcy exit plan” becomes effective.
From a legal perspective this is the date the
City officially emerges
While the last several years have been a struggle for citizens, employees, and our entire
community, years from now, we may well look back
at this period of time in our history as
the rebirth of Stockton.
We emerge from bankruptcy a
renewed city, perhaps better
prepared for our future than any other city
in the State, with a new value system, a
thorough understanding of our
operations and finances, and the
tools to maintain solvency
and adjust to economic conditions
for decades into the future.
Our fulfilled commitment to the community.
Our commitment to the community was to address the long-term, unsustainable debts and
obligations that created structural deficit issues and had
pushed the City’s General Fund
into insolvency. The City Council has had to
make many difficult decisions in the years
leading up to and throughout the bankrupt
cy process, which required adopting and
adhering to some basic guiding principles. As
we exit bankruptcy, we can assure you that
the City’s Plan of Adjustment delivers on all of these commitments:
• Sustainable and provides
for the health, safety, and welfare of the community;
• Sustainable and provides for the health, safety, and welfare of the community;
• Balanced among interested parties, while allowing for basic services;
• Results in fiscal stability and solvency,
demonstrated by our Long-Range Financial
• Protects essential City assets.
Solutions required hard work and significant change.
Over time, the City was facing over $2 Bill
ion in labor agreements, long-term debt, and
other obligations that
would not have been possible to
address outside of bankruptcy.
However, unlike personal bankruptcy, municipal bankruptcy does
not erase or “wipe out”
debt. Finding solutions required hard work and heavy lifting by everyone involved.
Focused by our guiding principles, we have achieved significant, sustainable change.
Our employees worked with us to accomplish equitable labor agreements that brought pay
and benefits more in line with the average of the
labor market. City retirees, represented
by a Retirees Committee, recognized that
lifetime City-paid healthcare benefits were not
sustainable and agreed to a settlement which helped to address the biggest obligation
facing the City’s General Fund – a $544 milli
on unfunded liability for retiree medical.
Citizens contributed by approving
Measure A – a sales tax increase that provides funding
for bankruptcy recovery and the Marshall Plan on Cr
ime, allowing us to
hire 120 additional
police officers to address issues of crime an
d providing for the health and safety of our
Some of our largest debt included bond financing by capital market creditors for City
buildings and projects that occurred in the
early 2000’s, all of which were paid for or
secured by the City’s General Fund. Stress
on the City’s General
Fund has been relieved
by changing terms and conditions of these
payment schedules, and
providing for an “upside” sharing when economic circumstances and Stockton’s recovery
Other agreements were reached
with creative solutions, for ex
ample, exchanging surplus
real property to settle a lawsuit and creating
a more efficient downtown parking district to
regain control of parking garages. In addition, we secured a new
agreement with the
California State Parks Division of Boating and Waterways for the
Downtown Marina and
revised contracts with local professional spor
ts teams, the Thunder (hockey) and Ports
By negotiating new labor agreements with employees
, settling with retirees to eliminate free
retiree healthcare, and working with our largest creditors toward reasonable agreements
that no longer rely on the City’s General Fund as a backstop for long-term debt, the City
successfully emerges from bankruptcy
solvent and with a sustainable plan.
You may continue to hear the rumblings of
one dissenting creditor, Franklin High Yield
Funds. Franklin is the only capital market creditor that has not reached agreement with the
City and has appealed the Judge’s decision to confirm the City’s Plan of
Judge Christopher Klein has confirmed the City’s
Plan over Franklin’s objections, and his
strong written opinion on t
he matter can be read at
order has denied Franklin’s
request to stop the City fr
om exiting bankruptcy, and
proceeding with recovery, while its appeal is pending.
Going forward requires living within our means.
As we begin the process of recovery, we mu
st maintain our new perspective and value
system and not repeat mistakes of
the past. We are account
able to you, the community,
our employees, and those who have invested in
our community. In every decision that we
make, we must show the long-term impacts of
policy decisions and budget assumptions to
ensure that all decisions are conservative and
reasonable. To accomplish this level of
fiscal discipline, we have committed to a
Long-Range Financial Plan, which was the basis
of all the agreements made as
part of the bankruptcy
Plan of Adjustment.
Our resources and funding are lean and do not allow for restoration of services that were
reduced or eliminated during our
fiscal crisis. With the exception of increases in public
safety, all other City services will only be in
creased through improved efficiencies. We
must work to restore finances so that we
can weather the impact of future economic
downturns or recessions.
Stockton’s future as a sustainable city.
Our Long-Range Financial Plan will allow us to continue to provide basic services, increase
public safety through the Marshall Plan on Crime, and maintain amenities that provide a
quality of life that allow us to attract more
employers and investors.
Recovery of other
services can occur with improvement in our local economy.
Cities throughout the nation are experiencing
fiscal distress of varying degrees. Some
have depleted all resources and do not have plans
for the future. Because we entered
bankruptcy in an organized manner, kept to
our guiding principles, developed a Long-
Range Financial Plan, and submitted a confirmable Plan of Adjustment, Stockton is on
sound fiscal footing.
Additional information is available on the City’s website. If you have any questions, please
or call (209) 937-8827.