Stockton to Slash Payments to Bondholders and Raise Taxes While Not Cutting City Pensions
The federal judge overseeing the bankruptcy of Stockton, Calif., ruled Thursday the city can exit court protection after slashing payments to bondholders and raising taxes in order to avoid cutting the city’s pensions.And the Los Angeles Times' take on things:
U.S. Bankruptcy Judge Christopher Klein called the city’s reorganization plan “the best that can be done” during a hearing in Sacramento.
Judge Klein approved the city’s reorganization plan over protests from two Franklin Templeton Investments-managed funds, which underwrote the bonds for Stockton’s fire stations and parks. The funds argued that the city could afford to repay more than its $4 million offer.
“We are disappointed,” said Franklin Templeton lawyer James Johnston after the ruling.
The restructuring didn’t call for cutting pension obligations to California Public Employees’ Retirement System, despite critics saying the city would still struggle to afford the state-mandated payments....MORE
Judge approves Stockton bankruptcy plan; worker pensions safe
A federal bankruptcy judge approved the city of Stockton’s bankruptcy recovery plan, allowing the city to continue with planned pension payments to retired workers.
The case was being closely watched after the judge ruled earlier this month that the city’s payments to the California Public Employees’ Retirement System could be cut in bankruptcy just like any other obligation.
If Judge Christopher M. Klein had rejected Stockton’s plan and forced the city to slash its payments to CalPERS, it could have opened the door for other cities struggling with escalating pension costs to follow suit.
Stockton officials had argued that they couldn’t afford to cut pensions or to create another retirement plan for its employees. They said employees would leave Stockton for other cities offering retirement benefits through CalPERS....MORE
