When Jefferson County, Alabama filed for Chapter 9 bankruptcy back in October it was thought to be one of the biggest municipal bankruptcy cases in history. A new record is about to be broken as another city is on the verge of taking the title of becoming the largest city in the United States to seek bankruptcy protection. Stockton, California is nearing bankruptcy in order to protect some 300,000 residents from its financial crisis.
Big City Problems
Up until last week, many Stockton residents had noticed oddities around town but nothing that confirmed or denied suspicions of financial trouble. Public services have slowed to a crawl and many city jobs, such as ticketing and parking officials, have appeared abandoned. Behind closed doors the city has been suffering financial woes for quite some time at the hands of poor fiscal management and expensive decision making practices.
The collapse of the housing market, over promised city employee pension benefits and decades of flawed accounting practices have lead Stockton to the trouble it is in today. With an unemployment rate of nearly 20 percent, the city has had difficulty keeping up vital assistance services for its struggling residents. Although city leaders are hoping to avoid bankruptcy, the City Council voted last week to pursue debt restructuring efforts that include the potential for a municipal bankruptcy filing.