Stockton, Calif., files restructuring proposal and mediation details

By Caroline Salls

Pittsburgh, July 23 - The City of Stockton, Calif., filed a 790-page restructuring proposal Friday with the U.S. Bankruptcy Court for the Eastern District of California as part of evidence related to the city's state-mandated AB 506 confidential mediation process.

The city said the document includes data proving that Stockton is insolvent and must modify city-paid retiree and retiree dependent medical premiums, as well as long-term debt obligations, including bonds backed by the city's general fund.

According to the documents filed Friday, the city was seeking debt service relief for a period of five years, from July 1 through June 30, 2017 on its $12.97 million remaining of series 2003 A and B housing project certificates of participation, $12.09 million remaining of series A 2006 lease revenue refunding bonds, $35.08 million remaining of 2009 series A lease revenue bonds and $30.36 million of 2007 series A and B variable-rate demand lease revenues bonds.

The city said it did not intend to pay debt serviced moving forward on its $124.28 million of series A and B 2007 taxable pension obligation except on the portion being paid from sources other than the general fund, which were expected to continue until the Sept. 1, 2037 final maturity of the bonds.

However, the city said it was seeking to completely eliminate the general fund share of the obligation.

Mediation

Stockton and its largest creditors concluded 90 days of confidential mediation on June 25.

The city said the mediation resulted in the tentative agreements with the majority of its labor unions, which will be presented to the city council for approval on July 24.

No agreements were reached with the city's largest creditors, forcing Stockton to file for bankruptcy on June 28.

Fiscal woes

Stockton said it was forced into bankruptcy after it was unable to close a $26 million gap in the current fiscal year.

The city said other declarations and documents filed as part of the proposal reveal its "dire fiscal circumstances, the vigorous efforts over the last three years to cut $90 million from the city's general fund and the difficult choices and painful reductions that have resulted in the limited resources that the city now has to preserve basic and essential services for public health and safety."

"The record will demonstrate that this city council did everything in its power to avoid bankruptcy," city manager Bob Deis said in the release.

"Just as we were committed to the AB 506 process, we are committed to the necessary restructuring and have made a good start toward the rebuilding that must occur."

Pendency plan

As previously reported, the pendency plan adopted by Stockton's city council in June will serve as the budget and operational plan for the city while in bankruptcy.

The pendency plan includes suspending payment of bonds, claims and long-term debt paid by the city's general fund; shifting some funds to other sources; modifications to terms of labor and employee agreements that reduce costs; and more employee salary and benefit reductions, including the reduction and ultimate elimination of city contributions to retiree medical insurance.

Stockton said previously that there are "no measurable service reductions" in the pendency plan and that citizens would not see any changes in service after July 1.

Stockton filed for bankruptcy on June 28 under Chapter 9 case number 12-32118.

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