Mediation an option in Franklin appeal of Stockton bankruptcy ruling

Earlier this month, Franklin Templeton Investments appealed Judge Christopher Klein’s decision to confirm Stockton’s plan to exit bankruptcy.

An option for resolving the case is mediation. The mediator would be Judge Herb Ross, a bankruptcy judge from Alaska with training in mediation and experience in appellate mediation, according to the U.S. Bankruptcy Appellate Panel of the Ninth Circuit.

Ross attended law school at the University of San Francisco, according to the always infallible Internet.

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Fugazi incident: The aftermath

As you may have read today, City Councilwoman-elect Christina Fugazi had an encounter with the Stockton police on Friday night.

Here’s some new follow-up reading material:

Read More »

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Vote totals updated and the Stockton City Council candidates who were comfortably ahead nine days ago are still comfortably ahead

On the day of the election, it was clear the winners in the City Council races would be District 1 incumbent Elbert Holman over Rick Grewal; District 3 challenger Susan Lofthus over fellow challenger Gene Acevedo; and District 5 challenger Christina Fugazi over incumbent Dyane Burgos Medina.

The San Joaquin County Registrar of Voters just now released updated figures (more vote-by-mail tallies) that are pretty complete, and nothing has changed but some numbers.

Here’s a look, though:
District 1: Holman ahead 55.2 percent-44.8 percent (was 55.5-44.5 on election night).
District 3: Lofthus ahead 65.1-34.9 (was 65.4-34.6).
District 5: Fugazi ahead 53.8-46.2 (was 53.7-46.3).

Still to be counted are some provisional ballots. More intriguing are updated vote totals in Stockton Unified.

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Jessica Glynn: An interview with Stockton’s new Office of Violence Prevention manager

Today’s paper includes this story on Jessica Glynn, the manager of Stockton’s brand-new Office of Violence Prevention.

On Monday, The Record spent some time with Glynn, City Manager Kurt Wilson and Chief of Police Eric Jones. Here’s some of what was asked and said:

WHAT UNIQUE CHALLENGES DOES STOCKTON FACE?
GLYNN: ”I think that getting more into the Ceasefire initiative and looking at what the problem analysis has told us of crimes committed in Stockton as opposed to those in neighboring cities like Oakland or Salinas … we don’t have these localized places of crime, neighborhoods where you can just expect crime to happen. It really permeates the entire city or happens throughout the city so that’s different and I think that our approach has been different. The systems of violence … we have this type of violence everywhere and since the dawn of humanity have had violence, but what makes Stockton unique is it’s not quite as localized as some cities.”

JONES: ”A lot of the root causes of crime are the same … but one of our highly unique situations in Stockton is that our crime hot spots are dispersed through the city, from north to south, east to west. I’ve mentioned the term checkerboard before … there’s no one bad side of the tracks. Even Oakland has much more concentrated areas. A lot of that goes back to how migratory some of our street gangs are but also just a lot of multi-housing high-density areas in town are spread out throughout the city also. You could probably overlay those and you’ll find some similarities.”

WILSON ON WHAT THE CITY WAS LOOKING FOR AS IT CONDUCTED THE SEARCH THAT RESULTED IN GLYNN’S HIRING: “The subject matter on one hand is academic. On the other hand, it’s more visceral. We’re trying to save lives and the future of the city. We have this real combination of those two things. The other challenge was, because it was being started from scratch, it’s not as if we could say, ‘Hey, Jessica come on in, here’s the policy manual, just read this and do what it says.’ In many respects, while we have the finish line sort of identified, we’re also asking her to navigate through the rest of the process, figuring out how it fits within a regular traditional municipal structure but still meets our needs. That person needed to also be able to kind of bob and weave to create something that’s going to be sustainable for the long haul.

“One of the things that stood out really was in her background. At first blush, you could look at it and say, ‘Well, it’s very broad, it’s kind of all over,’ which is good because this office is dealing with things that are really from A to Z. On the one hand it’s making that connection with the folks who need the services the most, the people who are the neediest and the most vulnerable within our whole community. On the other hand it’s having conversations with the most elite of our community and even those outside of our community in order to connect some of those dots. The common thread throughout all of her background was the passion. So there was a true link within each of those positions that demonstrated a clear passion for the people who were the most vulnerable, the people who were the most needy, the people who we’re trying right here the hardest to effect.”

GLYNN ON HOW SHE CHOSE HER CAREER PATH: “I was raised in a very liberal, progressive community (in Madison, Wis.) that valued engagement and I feel really fortunate to have had that experience. It was always kind of what you did. When I was in college I did a lot of community organizing work and worked with a youth program called Sustain Us that is involving youth in sustainable development initiatives at the United Nations and high-level decision-making bodies.

“I had thought that I, too, would be a biologist like my husband and went to college intending to study science and realized there’s much more interest in people. So that was kind of the direction it took, and I ended up with a focus in international development and economic development. I went to Kosovo and worked with women’s organizations postwar, where they weren’t at the table. I was there for about a year.  There were still bombings often. The country was still rebuilding.

“I think the common thread of all of the work that I did was involving people in the decision-making processes and involving people who traditionally aren’t at the table in having a say in the way their communities are led. I think that’s a big part of what Marshall Plan and Ceasefire are trying to do is take the work that is perhaps being done in these very different places, whether in county institutions or within the city or police department and with the community-based organizations and clergy and bringing people together to find these solutions to crime and systems of crime, systems of violence.”

WILSON  ON THE IMPORTANCE OF HAVING A POINT PERSON TO OVERSEE THE CITY’S LONG-RANGE ANTI-VIOLENCE EFFORTS: “When something is hot and heavy politically, it’s easy to put resources to it and pay attention to it and then as things change, the political winds shift or whatever the new crisis of the day is, we tend to move on to those other things. When we do that, which is similar to what happened last time we did Ceasefire, the results are not good, and because the whole concept here is the long-term, the systemic portion of our crime issue, it’s very important that we don’t just turn it on for a little while, then turn it off, turn it on, turn it off, so by having that point person who is able to really focus her efforts on that thing it increases the opportunities and the chances that we’re going to be able to really stick with this for the long haul.

“One of the reasons that crime is so high and that we need things like the Marshall Plan is that some of those underground things that haven’t been at the top of the priority list were allowed to fester for a long time. We allowed a culture that can benefit greatly from having those changes. The things that Jessica and her team do aren’t necessarily going to change the headlines tomorrow. Some of the benefits that we’re going to see five years from now, 10 years from now, whether or not people recognize it, will be attributed to the work that she and her team have done.”

GLYNN ON WHAT SHE HAS LEARNED ABOUT STOCKTON IN HER BRIEF TIME HERE: “You have an incredibly involved community in a way that may not seem immediately obvious from headlines. What’s been surprising coming from another place and only knowing what’s available online and in the media is that people have been working and work very hard to make Stockton a safe community and to be a great place to live. That needs to be perhaps a headline or it needs to be brought to the surface a little bit more because only hearing the terrible things that are happening in any community can be demoralizing and can kill community spirit.

“I think that you have an involved clergy in a way that I haven’t seen in many communities. You have a responsive community government and I think that … I’ve never seen transparency of process in a police department in the way that the Stockton PD has really stepped up.

“And then from the community level, meeting people and being so welcomed. I’ve lived in a lot of places and I’ve never felt so welcomed with such open arms. And this was before I took my position and people wanted to meet with me for various reasons. it was just, You know, I’m new to Stockton and people kind of orienting you to the community.”

GLYNN ON THE OFFICE SHE WILL BE RUNNING: “So much of the work we’re doing is the community-building piece that leads to violence prevention, whereas the violence intervention piece is all the police department. In terms of my staff, the Peacekeepers have been a presence in the Stockton community for almost 17 years. They’re now under the Office of Violence Prevention. We have supervisors of Peacekeepers and then the Peacekeepers manager.

GLYNN ON CEASEFIRE “CALL-INS:” ”The approach of identifying who is most at-risk of committing a crime or being the victim of a crime and targeting our efforts knowing that we have limited resources is strategic and necessary. The message of, ‘We care about you and we want you to succeed,’ is something that I’ve never heard law enforcement say to a community of essentially violent offenders. I think that the data doesn’t lie, I think evidence doesn’t lie, and it’s commendable that we’ve revived an effort that has been stripped of funding in many cities.”

GLYNN ON WHERE TO BEGIN IN A MASSIVE AND VITAL UNDERTAKING LIKE THIS: “I don’t have all of the answers and I don’t think any one person does. I think that many people in the Stockton community have been doing this a lot longer than I have and know the community much more intimately.

“It’s bringing these people and this institutional knowledge to the table. Where you start is you build a coalition of invested stakeholders who know the community, know the issues, know some solutions from at least within their own professional wheelhouse. I think that’s being done through Marshall Plan and Ceasefire. The beginning stages, it was rolled out in 2012, but I think that we’ve laid the groundwork and this office will be helping to serve as the convener if you will of some of these community stakeholders. People are engaged. I think it’s just making sure that we have a method of sharing information. We’re working on our reentry piece with probation and with the police department and with Friends Outside and other nonprofit organizations who have been around for over 50 years and do a good job, but making sure that everyone is at the table and is able to share best practices, and then when a service is needed or something comes up, strategizing together on what the strategy should be or best practices.”

JONES ON STOCKTON CRIME: “The data shows that (most “at-risk” people are) at equal risk typically of being a shooter, being incarcerated, or being a victim of being shot or killed, they’re typically the same high-risk group.

“As the phrase goes, suspect one day, victim the other, possibly, because of the active and violent lifestyle they’re engaged in.”

WILSON ON A NOW-DEFUNCT ANTI-VIOLENCE OFFICE HE PREVIOUSLY RAN IN SAN BERNARDINO: “The city of San Bernardino had some very similar crime issues and they went through a particularly high-profile set of violent issues involving children being shot either at the dinner table or in schoolyard playgrounds, some very, very ugly things. A new mayor had come on board who had spent 30 years as a superior court judge … he came on board and one of his initiatives coming from being a law-and-order person, he had an expectation and a desire to really take a different approach to crime reduction and to dealing with specifically violent crime, a situation not unlike where we are here.

“In that process, rather than Marshall Plan, it was Operation Phoenix. It was a concept there similar to many of the things that we have going on here. But here it’s much more advanced and much more refined, and it benefits from additional data that has taken place since that time. The concept was to create this Office of Community Safety and Violence Prevention (in San Bernardino) to do some of the same things that are going on that Jessica will be doing, but her role is far greater. This is a much more well-thought-out program. It’s designed to be much more sustainable than that one was. In fact, that one went away. It was never set up in a way that was really going to be sustainable. And because the concept is to do these long-range things, you can’t do that by popping in and out when it’s convenient or when the urge strikes you. … I think Jessica’s team is poised to have far greater and far more long-lasting results.

“The concept is that by laying the proper foundation now and having the office really interwoven into the other things we do as an organization, it will have longevity that is in perpetuity.”

WILSON ON COMPLAINTS THAT THE CITY DID NOT HIRE A LOCAL PERSON FOR THIS POSITION: “Like many decisions we make, I think perspective is really important. We as the decision makers and the people who have gotten to know her and her full background and gotten more than just a two-paragraph summary of her professional background have a very specific understanding and perception of what she does. Based on the number of people who were involved in this hiring process, that was consistent across the board. Everyone who we’ve come across who had the opportunity to really get to know her true skill set came away with the same impression. I’m not aware of any negative comments that have come from anyone who was privy to that information.”

GLYNN ON MEASURING THE EFFECTIVENESS OF HER OFFICE: HOW MEASURE EFFECTIVENESS: ”People keep saying to me that the absence of crime is going to be the greatest success but it’s the poorest measure. You can’t say for certain that it’s any one thing. We have an excellent police department who is doing a tremendous job through this initiative and we have many dedicated community-based organizations so to take credit for the absence of crime is going to be difficult. I think the measures of really engaging the community who perhaps hasn’t always been at the table will be important.

“I think that the long-term plan for this office in that it’s here and it’s established, is already a success. But in terms of some of the softer measures, I think that’s to be determined not just by me but by some of the partners again who have been doing this work for a long time, with our partners in probation and with the county and within the judicial system. I think it’s going to be a process of figuring out how we look at success or how we measure our success.”

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Library strategic and implementation plans

As reported in today’s paper, a strategic plan for the Stockton-San Joaquin County Public Library system will be discussed at tonight’s City Council meeting. You can view the plan here.

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For bond wonks: Here’s Moody’s take on the judge’s Stockton ruling

Here’s another reaction to Judge Christopher Klein’s confirmation of Stockton’s bankruptcy exit plan. Following is the email from Moody’s, which indeed is a bit moody about the decision.

Moody’s has issued a short report stating the bankruptcy judge’s confirmation of Stockton’s (rated Ca/negative outlook) bankruptcy plan is largely credit negative for investors, although there are some positive signs for investors in enterprise system debt.  Stockton’s bankruptcy confirmation also continue the likelihood of higher pension recoveries than debt in California Chapter 9 proceedings.

The report’s other points include:

  • Some California local governments with acute high fixed costs may still view Judge Klein’s October 1 decision as an inducement to use bankruptcy to modify their pension obligations. We believe that the risk of more Chapter 9 cases in California remains low and is generally diminishing because the economic recovery has improved the finances of many struggling cities. Despite this decision to confirm Stockton’s plan leaving pensions intact, local governments will now have more negotiating leverage with labor unions, who cannot count on pensions as ironclad obligations, even in bankruptcy.
  • The ruling is generally credit negative for investors in California lease-backed obligations, but positive for investors in enterprise system debt. Despite Judge Klein’s October 1 ruling that pensions can be impaired in Chapter 9 bankruptcy proceedings, confirmation gives pensions more favorable treatment than some Stockton lease-obligation creditors.  Outcomes on pensions may be different in other Chapter 9 cases.
  • The broad range of lease-obligation recoveries highlights the importance of evaluating asset essentiality in determining final recoveries for this type of debt. Obligations secured by leases covering important city functions such as fire, police and other administrative activities are more likely to receive high recoveries.
  • Plan confirmation is a credit positive development for enterprise debt with a special revenue pledge. Throughout its bankruptcy, Stockton maintained that the pledges securing its water and sewer bonds (rated Ba1/developing outlook) were “special revenues” and therefore exempt from impairment. Investors continued to receive timely debt service payments, and under the plan will receive full repayment of their principal.”
You can read the full report here.

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Stockton bankruptcy reactions

If you didn’t know, Stockton’s bankruptcy exit plan received court approval earlier today. Here are a few things that have popped into my email in the past couple of hours.
From Franklin Templeton Investments:

“We are disappointed with the decision and we are currently evaluating our options.”

Another:
“In response to Judge Klein’s opinion approving Stockton’s bankruptcy plan today, leading pension attorney Teague Paterson of Beeson, Tayer & Bodine, who filed an amicus brief for Peace Officers Association of California in this case, has made the following statement:

“Judge Klein’s decision to accept the Stockton Plan of Adjustment means that his October 1 opinion on pensions has little meaning for the future of public pensions. It has not established any legal or binding precedent.  The City of Stockton is able to do what’s right for the community – protect both pensions and public safety services.

“The outcome in Stockton is more evidence that bankruptcy is not an appropriate tool to jettison pension debt.  Bankruptcy simply has too much baggage to even be considered as a viable option for cities interested in dismantling public employee retirement. Ultimately, the decision in Stockton highlights a unique and unfortunate situation brought on by the financial collapse of 2008, and thankfully not a situation that the overwhelming majority of municipalities have to face.”

Dave Low, Chairman, Californians for Retirement Security

“This is a fair decision for Stockton and for the police, firefighters, and other public employees who negotiated substantial cuts to retirement and health benefits in order to help the city emerge from bankruptcy. Favoring Wall Street over Main Street in this decision would have led to a mass exodus of those and other employees who would have lost any incentive to rebuild the bankrupt city. The decision provides more incentive to solve pension issues at the bargaining table instead of in a courtroom.”

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Bankruptcy ruling: One day out

A full story will appear online and in Thursday’s paper, but here’s some of what a few people had to say today on the eve of federal Judge Christopher Klein’s expected ruling in the Stockton bankruptcy.

FORMER CITY MANAGER BOB DEIS
“I can’t imagine it would be a thumbs-down scenario. I am hopeful that it’s thumbs up. It’s time for the city to be able to move on and get this difficult chapter behind it. I guess there’s always a chance there might be a piece of the plan that he might want to see addressed but I would be completely shocked to see a thumbs down on the overall plan. The judge from the outset encouraged the city to negotiate deals and we got deals with everyone but one creditor (Franklin Templeton Investments). And what’s interesting, this is the one creditor that was the last one to loan money to a city that was already showing fiscal distress (in 2009). … I just find it ironic … I think there were enough signs that should have given them pause.”

MICHAEL SWEET, BANKRUPTCY ATTORNEY
“I think given how far the case has come, it’s unlikely the judge will deny confirmation, although he has expressed from the beginning of the case serious concerns about how the city has dealt with its pension obligations through the bankruptcy so I suspect we will hear more about that.”

“I think it’s highly unlikely confirmation will be denied … if he doesn’t confirm the plan it will be because he wants to see the city and Franklin work something out.”

KAROL DENNISTON, BANKRUPTCY ATTORNEY
“I still think it’s a close call. I think the court was hoping the parties might talk settlement in the intervening period but there’s absolutely no evidence of that. I’d be willing to bet that within the first two or three minutes of the hearing we’ll know which way this is going.”

“The bankruptcy code clearly allows a city to decide its own destiny. The court’s only choice is up or down. So many factors have to be weighed. I think it’s impossible to know all of the competing factors.”

“I think tomorrow you can expect a for-real ruling on confirmation. But I have to give the caveat that this is Chapter 9 and anything is possible.”

“If the court denies confirmation, essentially Stockton will be back at square one. It will all be a do-over in terms of whatever the court’s findings are in terms of why it did not confirm the plan.”

JEFF MICHAEL, DIRECTOR, UOP BUSINESS FORECASTING CENTER
“I think barring a last-minute settlement I think he’ll reject the plan based on what I’ve heard so far … primarily because it’s unfair to Franklin. I think Franklin would have a case for it to be unfair. The plan treats them very poorly compared to other unsecured creditors.”

“It’ll be interesting … the big question to me is if he does reject it, what’s next?”

“(If the plan is confirmed) the city will have a lot more certainty over its future budget, which will help it a lot with future planning. There’s definitely a cloud hanging over everything now. It certainly can be a boost to the city’s image. … The city will still be suffering consequences. All will still not be well with the city. It still will be a very tight budget. It certainly doesn’t mean we’ll start to see money flowing into city services but it will allow the city to move forward.”

Here’s what Franklin had to say most recently.

For their part, City Manager Kurt Wilson and attorney Marc Levinson have been attending the School of Loose Lips Sink Ships recently.

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Bankruptcy ruling: Two days out

Stockton is now two days away from Thursday’s potentially climactic bankruptcy hearing in Sacramento. If Judge Christopher Klein approves the city’s exit proposal (Plan of Adjustment) at the 10 a.m. hearing, the wheels will be in motion for Stockton to officially exit bankruptcy in the weeks ahead.

But if the judge approves Stockton’s plan, it seems certain he will be doing so without an agreement between the city and its one recalcitrant creditor, Franklin Templeton Investments. For those wondering, at this point it does not appear likely such an agreement will be reached. Here’s the most recent company statement from Franklin, sent to me yesterday:

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Student artists: Your chance to spruce up downtown Stockton

The Downtown Stockton Alliance and the Stockton Mural Art Resource Team (SMART) are sponsoring a contest in which student artists can submit designs to be painted on utility boxes along Weber Avenue. Young artists, you have until Nov. 17, so get to work and email your creations here. 

A first round of designs was painted onto utility boxes near Janet Leigh Plaza in June. You can read about the first phase of the utility box contest here.

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