Stockton, California Solidifies Its Bankruptcy Exit Plan

The struggling city of Stockton has made headway into its climb out of financial despair.  The city council has agreed to move forward with a plan that allows Stockton to adjust its outstanding debts while striking deals with its largest creditors–a number of bond insurers.  These very bond insurers were the strongest voice in opposition to the city entering bankruptcy, but now the deals that have been struck between them and Stockton can be the force that paves the city’s path to exiting bankruptcy and eventual financial stability.

The deals will decrease payments on bonds anywhere from 3 percent to 12 percent, while some bonds will be paid in whole.  The most important aspect of these deals and the exit plan is that the city’s retirees will remain entitled to pension payments.  City officials made a great effort to ensure that its employees, who have graciously taken cuts in wages in benefits, will still have pensions to secure their futures.

Stockton still faces two hurdles, however.  The city’s plan must first be approved by the bankruptcy court, and residents of the city must approve a tax measure next month.  The tax increase will enable libraries, community centers, fire houses, and police stations to function normally while Stockton navigates its way back to financial prosperity.

Read the full article by Reuters here