Nine long, tumultuous months after filing for Chapter 9 bankruptcy, Stockton is about to get its day in court. As are the city’s creditors, who will argue Stockton should not be allowed to enter Chapter 9.
Bloomberg has a good pre-game warmup.
“To win, the creditors must show the city failed to meet at least one of three primary tests specified in Chapter 9 or California law. Before turning to bankruptcy, a city must be insolvent, have permission from its state government, and have tried in “good faith” to negotiate a deal with creditors.
“The creditors are focusing on two of the tests, insolvency and good faith negotiations.
” …and the odds of success aren’t in their favor, said attorneys following the case,” the story says.
Right. How can they argue the city showed bad faith by not negotiating with CalPERS when CalPERS refused to negotiate? How can they argue the city could have raised taxes to pay its debts when its debts were balooning exponentially and the city, Ground Zero, the hardest hit by the mortgage crisis, an absolute economic basket case, suffered a nosedive in revenues of $90 million over four years?
Granted the way CalPERS will skate is noxious. The court should find, however, that further pummelling this poor city would be even worse.