It's official - Stockton files for bankruptcy protection

The Chapter 9 filing was made in federal bankruptcy court in Sacramento. Assets are listed as more than $1 billion and debt ranges from $500 million to $1 billion. This could be a difficult, protracted process for the city of 292,000. It took the city of Vallejo three years to reorganize and exit court protection. Stockton is the largest U.S. city ever to file for bankruptcy protection. From Bloomberg:

"We are extremely disappointed that we have been unable to avoid bankruptcy," Mayor Ann Johnston said in a statement. "This is what we must do to get our fiscal house in order and protect the safety and welfare of our citizens. We will emerge from bankruptcy with a solid financial future." The Chapter 9 filing allows Stockton, a city of 292,000, to suspend payments to creditors while it seeks court approval for a plan that balances its revenue with its debt. The budget for the fiscal year beginning July 1 calls for defaulting on $10.2 million in debt payments and cutting $11.2 million in employee pay and benefits under union contracts that could be voided by the bankruptcy court.

The irony is that Stockton's economy had been picking up a bit, although its unemployment rate remains stubbornly high at 14.5 percent.