Photo: Vixsjohnson via flickr
The city of Stockton, Calif., is poised to become the largest U.S. city to declare municipal bankruptcy, after a deadline to make a deal with creditors passed Monday night. The city council is expected to announce tonight whether or not an agreement was reached.
Stockton Mayor Ann Johnston told Stockton’s KCRA television station that a bankruptcy filing is “very likely.”
The decision will be the culmination of years of growing budget deficits, as Stockton struggled with the collapse of the housing market. The problems were compounded by expensive city investments — including a promenade, a sports stadium, and a hotel — as well as the growing costs of the city’s labour contracts and generous pension plans for retired city workers.
Over the past three years, the city has eliminated one-fourth of it’s police force, one-third of the fire department, and 40% of the rest of the municipal workforce to close a 90% budget deficit, according to the Associated Press,
For the past three months, Stockton officials have been negotiating with creditors to reach a financial settlement, but the deadline to reach an agreement passed on Monday. The city is insolvent and facing a $26 million budget deficit.
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