LOS ANGELES, CA (Catholic Online) - The Stockton city spokeswoman says that city officials would discuss any moves toward bankruptcy at the city council meeting this evening.

The council will take up and vote on a proposed budget to guide Stockton during bankruptcy, an option city officials have been considering since last February. City Manager Bob Deis unveiled the budget proposal, also known as a pendency plan.

The plan assumes that the city would fail to win concessions from its 18 creditors to close its $26 million shortfall for the fiscal year beginning on July 1.

Stockton's plan would suspend $10.2 million in debt payments, which will likely lead to further credit downgrades, and reduce spending on employee compensation and retiree benefits by $11.2 million.

According to the plan, about $7 million in savings would come from cutting retiree health care benefits for one year and then phasing them out. Stockton officials have said the benefits are a crushing expense due to their fast rise and projected liability of $417 million.

Stockton's confidential mediation with its creditors was part of an effort launched last February by city officials to restructure the city's finances in time for the beginning of its next fiscal year.

The plan left open the possibility of a bankruptcy filing in light of Stockton's severe financial troubles.

Mark McLaughlin, a member of the board of the city police officers' union, says that he is resigned to a bankruptcy filing. He expects his group will try to seek common ground with city before it should take that drastic step.

"It's unfortunate we're here but we need to keep working with the city," McLaughlin said.

Stockton's finances collapsed along with its housing market, forcing city officials to slash $90 million in spending in recent years.

Stockton has not been able to avoid recurring deficits in spite of drastic cuts. The city's revenue is weak and its financial troubles have been compounded by generous pay and benefits for city workers and retirees in addition to too much debt taken on by the city when it enjoyed a home-building boom in the aughts. 

Many of the houses built and bought in that boom have since been abandoned, repossessed and sold at deep discount as Stockton has been at the top or near the top of lists of housing markets suffering a glut of foreclosures in recent years.

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