“There is cause for celebration,” said City Manager Kurt Wilson in a prepared statement. “We have worked long and hard to get to this day. We owe a huge debt of gratitude to all of our City employees for their hard work, dedication, and the sacrifices they have made over the last several years. The stigma of bankruptcy is lifted, and we can move our city forward toward recovery.”
Judge Christopher M. Klein of the U.S. Bankruptcy Court signed the order confirming Stockton’s bankruptcy exit plan on Feb. 4, which paved the way for the city to make its final preparations to exit bankruptcy.
“We have spent the last several weeks finalizing dozens of complicated legal and real estate documents and making preparations for thousands of checks that must be issued for the effective date,” Wilson said.
The exit plan, or the plan of adjustment, includes the various agreements the city has reached with employees, retirees, capital market creditors, and numerous other creditors to restructure the city’s debt. Those changes would not have been possible outside of bankruptcy. Stockton has been able to address more than $2 billion in long-term debt and obligations that had overburdened the general fund and caused both fiscal and service insolvency, the city said. The plan of adjustment leaves the city fiscally solvent.
The city has also developed a long-range financial plan to provide a structure for financial decisions for the duration of the agreements that make up the plan of adjustment. Some of those agreements don’t expire until 2053. The plan requires fiscal discipline and does not allow for increases in employees or services, with the exception of police and the Marshall Plan on Crime, the city said.
“We emerge from bankruptcy a renewed city, perhaps better prepared for our future than any other city in the state, with a new value system, a thorough understanding of our operations and finances, and the tools to maintain solvency and adjust to economic conditions for decades into the future,” said Wilson.