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UPDATE: Stockton To Seek Bankruptcy Protection If Mediation Efforts Fail

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STOCKTON (CBS13) – Votes weren’t just be cast at polling places in Stockton on Tuesday night. City Council members also voted to take a step closer to bankruptcy.

Stockton is running out of money and time to make a decision on the city’s future. Staring at a $26 million deficit for the fiscal year starting July 1, the City Council voted 6-1 authorizing City Manager Bob Deis to file for Chapter 9 bankruptcy protection if mediation efforts fail to prevent insolvency by the end of June.

Councilman Dale Fritchen was the lone no vote. The vote came after more than four hours of discussion, including pleas from citizens to avoid the embarrassment of becoming the largest city in the nation to file for bankruptcy.

The contingency plan will allow the city to continue to provide day-to-day services until a long-term plan of adjustment can be negotiated and approved, should bankruptcy protection become necessary.

“It’s time to stop the chaos and the degradation of this organization and fix the structural imbalance,” Deis said in a prepared statement after the vote. “We have to start the road to recovery.”

Stockton residents can’t cast a vote in the council chambers, but they were doing it at the polls. They’re running out of patience with city leaders.

“I’m hoping I voted for the right person,” James Gonzalez said. “It’s going to take the community to do something to get us out of this situation.”

On this election day, major decisions were being made by both voters and city officials. Stocktonians must decide who to elect or re-elect to help get them out of this economic mess. City leaders must decide if this cash-strapped city will file for bankruptcy. They’re $26 million in the red right now.

“That’s why we’re really up against the wall,” said Mayor Ann Johnston, who is running for re-election against six challengers.

The mayor, council members and city manager are now renegotiating, hoping to restructure debts with lenders and agreements with labor unions over benefit packages. They believe mediation can help stop the bleeding.

“It’s a good sign that all the parties agreed to extend the mediation for 30 days,” Johnston said. “So what could have ended at the end of May is going to be extended to the end of June.”

Stockton is a storied city but with a reputation throughout the country as being a crime-ridden community suffering from deep public safety cuts and lost revenue through a tidal wave of foreclosures.

Now, the city may set a new infamous record as being the largest city in America to ever declare bankruptcy.

“If we don’t a have a settlement or we don’t have a court order we will not have cash on hand at the end of June,” the mayor said.

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