STOCKTON, Calif. (AP) — After years of struggles, a Central California city is poised to become the most populous in the nation to enter bankruptcy when its trial begins Monday in federal court.
Creditors who lent Stockton money are challenging its Chapter 9 bankruptcy petition, but most observers say there's no doubt the city of 300,000 will be successful.
Its largest creditors are bond insurers who helped the city refinance pension debt. They will argue that Stockton is solvent and hasn't cut spending enough.
For years Stockton's salaries, benefits and borrowing were based on anticipated long-term developer fees and increasing property tax revenue. But those were lost in a flurry of foreclosures.
The city has become emblematic of both government excess and the financial calamity that resulted when the nation's housing bubble burst.