The city of Stockton has filed for bankruptcy after months of discussions regarding the city’s financial situation. City officials were unable to reach an agreement with the city’s creditors, leading them to file for Chapter 9 protection.
Stockton is home to 290,000 residents, making it the largest city to ever file for Chapter 9 bankruptcy in the United States.
“We are extremely disappointed that we have been unable to avoid bankruptcy,” Stockton Mayor Ann Johnston said in a statement. “This is what we must do to get our fiscal house in order and protect the safety and welfare of our citizens.”
Chapter 9 bankruptcy is meant to assist municipalities to restructure debts by stopping a city’s ability to develop. With a $26 million deficit, declaring bankruptcy was the only option that city officials could agree on.
The official bankruptcy filing came from city manager Bob Deis, who said the city needed an emergency budget plan.
“This is not where any of us wanted to be,” Deis wrote in a statement. “But absent restructuring agreements with our creditors, any other options would decimate the city.”
Cal Poly graduate and Stockton native Scott Silvey said he isn’t shocked by the recent bankruptcy of his hometown.
“It’s not really surprising,” Silvey said. “When I was younger the town was crime-ridden and it seemed really poor. The violent crime rate was so high.”
Silvey moved out of Stockton at about the same time that the housing boom started, he said. Between 2003 and 2005, almost 8,000 homes were built in Stockton, according to a 2008 USA Today news article.
“Now, I feel like they wish they hadn’t spent so many millions of dollars, and the crime is back now because there are so many poor people living there,” Silvey said. “I read that people don’t even call the cops when they hear gunshots anymore.”
Though Silvey isn’t surprised, the recent bankruptcy announcement still upsets him because as part of the new budget, city retirees benefits are being cut in July 2013, he said.
Silvey’s mom was a social worker for the city of Stockton for approximately 15 years, and would have been affected by the cuts had she not remarried. She now has Alzheimer’s disease, and without her husband’s benefits, she would have been cut off of medical care in July 2013, Silvey said.
“As a former Stockton resident,” he said, “it makes me sad that the people that are going to take the brunt of all the bankruptcy issues are the people that worked for the city.”
Amber Diller contributed to this article.