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Stockton Ca. To Enter Bankruptcy
Topic Started: Apr 1 2013, 09:49 PM (546 Views)
Zechariah
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Zechariah
Judge rules Stockton, Calif., to enter bankruptcy

SACRAMENTO, Calif. (AP) — The people of Stockton will feel financial fallout for years after a federal judge ruled Monday to let the city become the most populous in the nation to enter bankruptcy.

But the case is also being watched closely because it could answer the significant question of who gets paid first by financially strapped cities — retirement funds or creditors.

"I don't know whether spiked pensions can be reeled back in," U.S. Bankruptcy Judge Christopher Klein said while making the ruling. "There are very complex and difficult questions of law that I can see out there on the horizon."

The potential constitutional question in the Stockton case is whether federal bankruptcy law trumps a California law that says money owed to the state pension fund must be paid.

In making his ruling, Klein disagreed with creditors who argued that Stockton failed to pursue all avenues for straightening out its financial affairs.

"It's apparent to me the city would not be able to perform its obligations to its citizens on fundamental public safety as well as other basic government services without the ability to have the muscle of the contract-impairing power of federal bankruptcy law," Klein said.

A statement released by creditors said the group "respectfully disagrees with the court's ruling." The legal team for those creditors declined to say whether it would ask Klein for permission to appeal his decision — a requirement of bankruptcy code.

Stockton has tried to restructure some debt by slashing employment, renegotiating labor contracts, and cutting health benefits for workers. Library and recreation funding have been halved, and the scaled-down Police Department only responds to emergencies in progress. The city crime rate is among the highest in the nation.

Since cities can't liquidate assets, those that declare bankruptcy must come up with a plan for creditors to forgive some of the debt.

Holders of the biggest portion of Stockton's debt insured $165 million in bonds the city issued in 2007 to keep up with payments to the California Public Employees Retirement System as property taxes plummeted during the recession.

Stockton now owes CalPERS about $900 million to cover pension promises, far the city's largest financial obligation. Many struggling cities across California are in the same situation.

So far, Stockton has kept up with pension payments while reneging on other debts, maintaining it needs a strong pension plan to retain its pared-down workforce.

Attorneys for creditors argued that it was unfair for their clients to accept reduced payments while the pensions negotiated in flush times went untouched. They argued that employees who shared the wealth during good times should bow have to endure some of the pain with cuts to their pensions.

Legal observers expect the creditors to aggressively challenge the repayment plan presented by Stockton in the next phase of the process.

"That's where it will be precedent-setting," said Karol Denniston, a municipal restructuring expert who monitored the trial. "Does bankruptcy code apply to CalPERS or not? If bankruptcy code trumps state law, then that's huge and it has huge implications in terms of what happens next for other municipalities across California."

The state pension plan manages $255 billion in assets but was underfunded by $87 billion in 2011, the last time calculations were made. CalPERS is in the process of setting new rates to close the liability, said spokeswoman Amy Norris.

The changes could further strain at least two dozen other financially strapped cities, including San Bernardino, San Jose, Compton, Fairfield, Watsonville, Atwater.

"Just about everybody has an unfunded liability," Norris said.

Legal observers of the first-ever Chapter 9 bankruptcy case questioning state pension obligations expect an appeal to decide whether the 10th Amendment that gives rights to states is more powerful than federal bankruptcy code

Even Judge Klein, who was inclined at first to approve bankruptcy without a trial, said he was going forward with the hearing that ended Monday to create an appellate record.

Now the city of nearly 300,000 people begins a months-long process of negotiations over debt repayment. Already Stockton has spent $2 million on mediation and up to $5 million on the eligibility case, said Bob Deis, Stockton's city manager.

"There's nothing to celebrate about bankruptcy," he said. "But it is a vindication of what we've been saying for nine months."

http://www.businessweek.com/ap/2013-04-01/stockton-bankruptcy-decision-only-the-beginning
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Archaicwisdom

Blame the unions.
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Zechariah
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Zechariah
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
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Archaicwisdom

zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
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Zechariah
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Zechariah
Archaicwisdom
Apr 2 2013, 10:24 PM
zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
From all that I read, it's related to the erosion of the tax base, due to unemployment, business flight and unproductive property. Unions??????? :'(
Edited by Zechariah, Apr 3 2013, 06:28 AM.
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Archaicwisdom

zecharia
Apr 3 2013, 06:27 AM
Archaicwisdom
Apr 2 2013, 10:24 PM
zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
From all that I read, it's related to the erosion of the tax base, due to unemployment, business flight and unproductive property. Unions??????? :'(
So basically you ascribe to the liberal fallacy that our financial woes are attributed to insufficient revenue. Tell me, if you were 100,000 in debt, is the problem that you spent too much or that you don't have enough income? It really is that simple...IT REALLY IS.
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Zechariah
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Zechariah
Archaicwisdom
Apr 7 2013, 11:27 AM
zecharia
Apr 3 2013, 06:27 AM
Archaicwisdom
Apr 2 2013, 10:24 PM
zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
From all that I read, it's related to the erosion of the tax base, due to unemployment, business flight and unproductive property. Unions??????? :'(
So basically you ascribe to the liberal fallacy that our financial woes are attributed to insufficient revenue. Tell me, if you were 100,000 in debt, is the problem that you spent too much or that you don't have enough income? It really is that simple...IT REALLY IS.
They are bringing in no revenue. Businesses are closing or moving to Mexico, and paying no taxes. Employees are laid off, and paying no state tax. Properties are redundant and producing no tax revenue. Surviving businesses are producing less revenue (less taxes). People are leaving these "dead" cities, causing them to receive less fed funds for schools etc, People are purchasing less, etc. Unions???? :D
Edited by Zechariah, Apr 7 2013, 08:36 PM.
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Archaicwisdom

zecharia
Apr 7 2013, 08:34 PM
Archaicwisdom
Apr 7 2013, 11:27 AM
zecharia
Apr 3 2013, 06:27 AM
Archaicwisdom
Apr 2 2013, 10:24 PM
zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
From all that I read, it's related to the erosion of the tax base, due to unemployment, business flight and unproductive property. Unions??????? :'(
So basically you ascribe to the liberal fallacy that our financial woes are attributed to insufficient revenue. Tell me, if you were 100,000 in debt, is the problem that you spent too much or that you don't have enough income? It really is that simple...IT REALLY IS.
They are bringing in no revenue. Businesses are closing or moving to Mexico, and paying no taxes. Employees are laid off, and paying no state tax. Properties are redundant and producing no tax revenue. Surviving businesses are producing less revenue (less taxes). People are leaving these "dead" cities, causing them to receive less fed funds for schools etc, People are purchasing less, etc. Unions???? :D
nice try. but if the city wasn't accruing revenue then they wouldn't have any public workers and this article wouldn't be about pension obligations, which IS the problem, but rather the elements you detailed. IL democrats tried to pull the same bit, claiming that there was no way to save pensions and that tax income was insufficient, yet they happened up millions of dollars to give state inmates cable television in addition to pay increases for themselves! Meanwhile they CLOSED the Murray center which houses developmentally challenged adults.
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Zechariah
Member Avatar
Zechariah
Archaicwisdom
Apr 7 2013, 10:01 PM
zecharia
Apr 7 2013, 08:34 PM
Archaicwisdom
Apr 7 2013, 11:27 AM
zecharia
Apr 3 2013, 06:27 AM
Archaicwisdom
Apr 2 2013, 10:24 PM
zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
From all that I read, it's related to the erosion of the tax base, due to unemployment, business flight and unproductive property. Unions??????? :'(
So basically you ascribe to the liberal fallacy that our financial woes are attributed to insufficient revenue. Tell me, if you were 100,000 in debt, is the problem that you spent too much or that you don't have enough income? It really is that simple...IT REALLY IS.
They are bringing in no revenue. Businesses are closing or moving to Mexico, and paying no taxes. Employees are laid off, and paying no state tax. Properties are redundant and producing no tax revenue. Surviving businesses are producing less revenue (less taxes). People are leaving these "dead" cities, causing them to receive less fed funds for schools etc, People are purchasing less, etc. Unions???? :D
nice try. but if the city wasn't accruing revenue then they wouldn't have any public workers and this article wouldn't be about pension obligations, which IS the problem, but rather the elements you detailed. IL democrats tried to pull the same bit, claiming that there was no way to save pensions and that tax income was insufficient, yet they happened up millions of dollars to give state inmates cable television in addition to pay increases for themselves! Meanwhile they CLOSED the Murray center which houses developmentally challenged adults.
A city of only 300,000 cannot support the kind of programs that they have. They know there's no way to achieve the amount of money necessary to meet the pension demands, due to the points I raised...good try.
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Archaicwisdom

zecharia
Apr 7 2013, 10:15 PM
Archaicwisdom
Apr 7 2013, 10:01 PM
zecharia
Apr 7 2013, 08:34 PM
Archaicwisdom
Apr 7 2013, 11:27 AM
zecharia
Apr 3 2013, 06:27 AM
Archaicwisdom
Apr 2 2013, 10:24 PM
zecharia
Apr 2 2013, 10:21 PM
Archaicwisdom
Apr 2 2013, 10:13 PM
Blame the unions.
Is that going to apply to all of America's bankrupt cities?
Absolutely. A common denominator among fiscally insolvent states, my state of IL being one of them, is an inability to meet retirement and other demands advocated by public unions. Their demands are just not realistic and certainly not in accord with those in the private sector.
From all that I read, it's related to the erosion of the tax base, due to unemployment, business flight and unproductive property. Unions??????? :'(
So basically you ascribe to the liberal fallacy that our financial woes are attributed to insufficient revenue. Tell me, if you were 100,000 in debt, is the problem that you spent too much or that you don't have enough income? It really is that simple...IT REALLY IS.
They are bringing in no revenue. Businesses are closing or moving to Mexico, and paying no taxes. Employees are laid off, and paying no state tax. Properties are redundant and producing no tax revenue. Surviving businesses are producing less revenue (less taxes). People are leaving these "dead" cities, causing them to receive less fed funds for schools etc, People are purchasing less, etc. Unions???? :D
nice try. but if the city wasn't accruing revenue then they wouldn't have any public workers and this article wouldn't be about pension obligations, which IS the problem, but rather the elements you detailed. IL democrats tried to pull the same bit, claiming that there was no way to save pensions and that tax income was insufficient, yet they happened up millions of dollars to give state inmates cable television in addition to pay increases for themselves! Meanwhile they CLOSED the Murray center which houses developmentally challenged adults.
A city of only 300,000 cannot support the kind of programs that they have. They know there's no way to achieve the amount of money necessary to meet the pension demands, due to the points I raised...good try.
how does a city of only 300,000 amass that sort of debt to its pensions?
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