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STOCKTON — Stockton city officials and pension recipients can breath a little easier. That is because Judge Christopher M. Klein accepted the city’s bankruptcy recovery plan Thursday morning.
Among other things, that decision allows the insolvent city to continue with planned pension payments to retired workers. The case was being closely watched as a month earlier, the same judge had ruled that the city’s payments to the California Public Employees’ Retirement System could be cut in bankruptcy. If Klein had rejected the Stockton’s plan it would have opened the door for Stockton and other cities to cut their pension payments.
It would have also sent the city back to the negotiating table to rework another plan with the city’s various creditors and unions.
Klein agreed with Stockton that the city employees had taken a big enough hit in salary reductions and elimination of free medical care they receive in retirement.
One of the biggest sticking points had been with Franklin Templeton Investments, the lone creditor with which Stockton had not come to an agreement. The company loaned the city $35 million for streets, a new firehouse and parks. The city’s plan called for the company to receive only $300,000 toward the outstanding debt.
Franklin Templeton Investments claimed that it was being treated unfairly. The investment firm argued that Stockton agreed to better terms with its other creditors, and that the city’s economic projections showed it could afford to eventually pay back most or all it owed Franklin Templeton. The judge disagreed. The decision could be appealed and lawyers for the firm told the court they would evaluate their options.
“I think this is a great day for the city of Stockton,” said city councilman Elbert Holman. “Now the city can move forward.”
Assuming the decision stands, Stockton can now move on with the final phase of the bankruptcy process. The tenets of the plan of adjustment must still be put into action before the city can officially exit bankruptcy.