Analysis: Stockton, California new paradigm for struggling cities

By Hilary Russ | Reuters
NEW YORK (Reuters) - Stockton, California, the largest city in the United States to ever file for bankruptcy, could create a new template for struggling cities and potentially lift the stigma that scars municipalities if they seek court protection from creditors.

If Stockton, which filed for Chapter 9 municipal bankruptcy on June 28, can reach consensus with its creditors and craft a plan to exit bankruptcy quickly others may follow suit, legal experts said.

"Successful cases breed more filings," said Andrew Glenn, a bankruptcy partner in New York at Kasowitz
Benson Torres & Friedman. "Municipalities watch these cases closely around the country, and once the template is set up, if other towns have these problems, they're going to follow the template."

Other cities and counties have gone bankrupt because of a bad investment or ill-conceived public works project, like the sewer system that sank Jefferson County, Alabama, into $3.14 billion of debt.

But Stockton may be a new breed of failing city, swamped by routine costs, pension payments, a payroll for city employees, a years-long economic slide and depressed housing tax receipts - the same issues that currently face many other cities still struggling to recover from the cavernous U.S. recession.

"Stockton is a precursor of something very different" from Jefferson County, Glenn said. "That's what makes it sort of a game-changing type of a case."

It will be the first case to test California's mandated mediation process. State lawmakers changed the rules after the city of Vallejo went bankrupt in 2008 and then slogged through a three-year bankruptcy battle that racked up at least $10 million in attorneys' fees.

Now, unless they declare a fiscal emergency, California municipalities must participate in mediation before they are allowed to file for bankruptcy.

Each state has different requirements for cities and towns that want to file for Chapter 9 bankruptcy.
Some use budget commissions, receivers and other measures to try to help resuscitate cities before allowing them to go bankrupt as a last resort. Nearly half of U.S. states don't allow municipal bankruptcies at all.

James Spiotto, a partner at Chapman and Cutler in Chicago, said California is the only state that requires mediation prior to a Chapter 9 filing. A similar proposal failed to pass the Illinois legislature this session, he said.

He also noted in a recent national survey of Chapter 9 state provisions that California labor unions supported the mediation law as "a reaction to the difficulties they experienced in the city of Vallejo Chapter 9 bankruptcy proceeding."

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'We the People' can bring Stockton back to the top

With less than 6 weeks until California's Primary, I have found myself in a tough position, yet still ahead of the pack. The reality is that Stocktonians know who I am, being one of the top record producers in the region, as well as being the founder of Oh Zee Clothing, a popular brand here in the Central Valley. I felt more compelled to begin a Political movement to bring the power back to the people. An ideal society, is one with a small governing body, nobody can argue that as the foundation of my political platform.

The race for the office of Mayor has already given me the opportunity to exceed my expectations, and venture into the Political world a lot sooner than I had anticipated. I made the decision to get involved in politics when I was in the 5th Grade. Here I am fifteen years later, officially listed as a candidate on California's 2012 Primary Ballot. I have not declared myself as a member of any political party, because I do not wish to draw boundaries to confine my decision making to be based solely on that party's agenda.

I have seen what it is going to take to win, and I am taking the necessary steps to ensure victory come June 5th. Regardless of what the other candidates plan to throw at me as we get closer to our State's Primary, I will continue to run a fair campaign all the way til election day.

Already I have seen a flurry of campaign signs being placed all over town, most of which are illegally posted on Public Property, in the Public right of way, or inside the utility easement. What is the penalty for violating the Stockton Municipal Code? Shouldn't they be fined for said offense? As well as full disclosure of their blatant disregard of the statutes concerning sign placement which was put forth in the City's Charter back in 1989.

May I officially call out Mayor Ann Johnston, who is also trying to bypass the rules of the Charter, which states;

"No person elected shall serve more than two (2) consecutive terms as a member of the Council or Mayor."

I am asking her to withdrawl her candidacy immediately, before this requires legal attention. The rules set by our fore-fathers were done for a reason, for us to follow. If she chooses not to follow our civil code, what makes you believe that she wants whats best for Stockton? The citizens are furious with this administration laying-off roughly 20% of our City's police force, at a time when Stockton topped the murder per capita nation-wide.

Take a stance in 2012, by joining Greg Pitsch and his supporters in a last chance effort to take our city back! It's time to say, "No more!"



Greg Pitsch 111
The Future Mayor of Stockton.