Everyone can get in money troubles, and with the economy’s prolonged slump, savings are running out and people are getting a little desperate. With cities facing record shortfalls, businesses failing, and individuals running record debts, it’s only a matter of time before a major US city faces a tough decision. Enter Stockton, California. Facing a $26 million dollar budget shortfall, the 290,000-person city of Stockton, California, is going to become the largest US city ever to declare bankruptcy. The city is expected to file for bankruptcy on Friday; the city council voted 6-1 to approve a special bankruptcy budget and move forward with the filing.
“Unfortunately we have no comprehensive set of agreements with our creditors that would eliminate the deficit and avoid insolvency,” said Stockton City Manager Bob Deis at a city council meeting on Tuesday. ”We think Chapter 9 protection is the only choice left. If we get any agreements, those will be honored in Chapter 9.”
Chapter 9 bankruptcy was added by Congress in 1937 to allow cities and municipalities to file for protection from their own debts. Only 640 cities have declared bankruptcy, but last year 13 of them filed. That’s the most on record, tied with 1994. Stockton has slashed benefits, wages, and services across the board and plans to increase revenues through more speeding fines and parking tickets. Great idea, Stockton.
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