Chapter 9 Bankruptcy
Bankruptcy Court Schedule
Chief United States Bankruptcy Judge Christopher Klein conducted a hearing on the City's Proposed Plan of Adjustment, as amended (also known as the "Exit Plan") on May 12 - 14, 2014. The matter was continued to Wednesday, June 4. At the conclusion of the hearing, Judge Klein scheduled July 8, to rule on the value of collateral provided to creditor Franklin High Yield.
At the July 8, hearing, the Judge ruled on the value of the secured portion of Franklin's claim, setting the value at $4,052,000. He also provided direction related to CalPERS and requested additional briefings from any and all parties, setting the next court date for October 1.
On October 1, the Judge ruled that the City's relationship with CalPERS is contractural, and that the contract can be impaired in bankruptcy. The Judge did not rule that the City must reject the CalPERS contract; the City's proposed Plan of Adjustment does not reject the contract.
On October 30, 2014, the Judge ruled that the City's Plan of Adjustment will be confirmed. The following is a link to the transcript for the confirmation hearing.
At the confirmation hearing, the Judge scheduled a status conference for December 10, 2014. At the status conference the City provided an update and Judge Klein considered two motions by Franklin.
In the first motion, Franklin requested a stay that would prevent the City from implementing the Plan of Adjustment (exit plan) until the Franklin appeal is resolved. The Judge determined that it was premature to rule on that motion and deferred the matter until the next status conference, which was originally scheduled for January 7, 2015, and continued until January 13, 2015.
The second motion by Franklin challenged the amount of money it should receive under the plan for the unsecured portion of its claim, asserting that it should be calculated based on present value. A present value calculation would have impacted the amount for individual retirees under the retiree medical settlement, as well. The Judge agreed with City on this issue and the method of calculation will stand.
The status conference was held on January 13, 2015. Judge Klein agreed to consider Franklin's request for stay of the confirmation order submitted to the court filed on January 7, 2015, on January 20, 2015. On January 20, 2015, Judge Klein rejected Franklin's motion to stay Stockton's bankruptcy exit plan, pending Franklin's appeal.
Once Judge Klein signs the confirmation order, an automatic stay will be in place for 14 days, after which the City's Plan can go into effect. It is anticipated that the bankruptcy plan of adjustment will go into effect in mid-February.
The next court date is a status conference and has been scheduled for Wednesday, February 25, 2015, at 10a.
For information about the Court and the Court schedule, please view the Court web site listed under External Links below and view the Court calendar for Judge Christopher M. Klein.
Plan of Adjustment and Disclosure Statement
The First Amended Plan was modified, August 8, 2014:
- August 8, 2014, First Amended Plan Modified (70 page PDF)
- August 8, 2014, Red-lined version of First Amended Plan Modified (79 page PDF)
The Stockton City Council approved agreements with creditors under the City's bankruptcy Plan of Adjustment, April 15, 2014, at the regularly scheduled Council Meeting, under item 15.2:
- April 15, 2014, City Council Meeting Minutes (see item 15.2)
- Creditor Agreements PowerPoint Presentation, April 15, 2014, Item 15.2
On November 18, 2013, the court approved the City's Modified Disclosure Statement and First Amended Plan of Adjustment of Debts.
- Modified Disclosure Statement With Respect to the First Amended Plan For The Adjustment Of Debts Of City of Stockton, California, Dated November 18, 2013 (the "Disclosure Statement")
- This is Document 1215 and is a 201 page PDF file.
- Amended Plan Of Adjustment (the "Plan")(which is an exhibit to the Disclosure Statement)
- This is Document 1204 and is a 67 page PDF file.
- November 22, 2013, Bankruptcy Court order that approves the Disclosure Statement, establishes various deadlines, and schedules the hearing on confirmation of the Plan (the "Order")
- This is Document 1220 and is a 42 page PDF file.
At a Special Meeting on October 3, 2013, the Stockton City Council approved a Proposed Plan of Adjustment and Disclosure Statement for Submittal to Bankruptcy Court. The Plan and Disclosure Statment were filed with the court on October 10, 2013.
Bankruptcy Court Notices
Periodically, the Bankruptcy Court will mail creditors and other interested parties notices of upcoming hearings and of other developments in the chapter 9 case. If you have questions about these notices, please contact the City of Stockton Public Information Officer.
Stockton Bankruptcy Information
On June 28, 2012, the City of Stockton filed a petition for chapter 9 bankruptcy protection with the United States Bankruptcy Court, Eastern District of California, Sacramento, Case No. 2012-32118. Judge Christopher M. Klein ruled on Monday, April 1, 2013, approving the petition and providing bankruptcy relief for the City of Stockton General Fund.
- April 1, 2013 - Transcript of Judge Christopher M. Klein ruling (54 page PDF file)
- June 12, 2013 - Opinion Regarding Chapter 9 Order for Relief (49 page PDF file)
- Written Opinion of Judge Christopher M. Klein ruling of April 1, 2013
With the bankruptcy petition approved, the City will focus on continuing to work with creditors toward a Plan of Adjustment. The Plan of Adjustment, which must be confirmed by the court, confirms the terms and conditions of payment of debt with the limited financial resources available. The restructuring of debt and other City obligations is essential to restoring fiscal health and moving the City forward to a sustainable future.
The Stockton City Council approved a Pendency Plan on June 26, 2012. The Pendency Plan is essentially the budget and the financial plan that is followed for the day-to-day operations of the City while in bankruptcy. It identifies reduced or suspended expenditures. The City will continue to pay employees, vendors and service providers. The focus of the City's plan is the restructuring of above market pay and benefits and unsustainable long term debt.
On April 1, 2013, the Judge ruled that Stockton is eligible for Chapter 9 bankruptcy protection. The City will file a Plan of Adjustment with the bankruptcy court in September. The City Council adopted a Fiscal 2013-2014 Annual Budget as part of the City's Pendency Plan on June 25, 2013. To view this budget and budgets for prior years, please view the Budget web page.
City of Stockton Material Events Notices (MEN) are available on the EMMA (Electronic Municipal Market Access) web site. A link to the EMMA web site is provided under External Links below.
Majority of City's Budget Not Part of Bankruptcy
The majority of the City's budget is not impacted by the City's fiscal crisis. The total budget of $633 million includes $450 million in restricted funds, which cannot be used to resolve the General Fund crisis. The $183 million General Fund provides for services such as police, fire, libraries, parks maintenance and administrative functions. The Pendency Plan will protect these essential services for the safety and welfare of our citizens.
An Open Letter to the Community - Stockton's Bankruptcy
On July 24, 2012, the Stockton City Council approved an Open Letter to the Community regarding Stockton's Bankruptcy.
City AB 506 Restructuring Proposal
- City of Stockton Restructuring Proposal Summary (3 pages)
- News Release - City of Stockton AB 506 Restructuring Proposal Released (6 pages)
- Stockton AB 506 Restructuring Proposal (1 of 3 files) (79 pages)
- Stockton AB 506 Restructuring Proposal (2 of 3 files) (667 pages)
- Stockton AB 506 Restructuring Proposal (3 of 3 files) (44 pages)
- Stockton AB 506 Mediation Sessions (6 pages)
- Stockton AB 506 Mediation Outcome (2 pages)
City Pendency Plan
- Employee Letter - October 1, 2012, City Bankruptcy Update and State Approved pension Changes
- January 20, 2015 - Stockton Gets Approval to Move Forward with Exiting Bankruptcy
- Franklin request for stay pending appeal denied by Judge
- April 1, 2013 - Judge Rules Stockton Chapter 9 Eligible
- Petition for bankruptcy relief approved
- March 27, 2013 - Stockton Chapter 9 Eligibility Trial Concludes
- Chief Judge Christopher M. Klein decision Monday, April 1, 2013, 10a
- March 26, 2013 - Stockton Chapter 9 Eligibility Trial Update
- March 25, 2013 - Stockton Chapter 9 Eligibility Trial Begins
- February 26, 2013 - News Release - First Agreement with Capital Markets Creditor, City and Ambac
- December 14, 2012 - News Release - Objections Challenge Stockton's Bankruptcy Eligibility
- October 3, 2012 - Letter to the Editor, The Bond Buyer - Stockton's Restricted Funds Healthy
- September 27, 2012 - Oped, Wall Street Journal - A Message From the City that Went Bankrupt
- August 6, 2012 - News Release - Bankruptcy Judge Ruling Retiree Medical Premiums
- July 24, 2012 - News Release - Stockton's Bankruptcy - An Open Letter to the Community
- July 24, 2012 - News Release - Stockton Approves Agreements with Six Labor Groups
- July 20, 2012 - News Release - City of Stockton AB 506 Restructuring Proposal Released
- June 28, 2012 - News Release, Stockton Files for Chapter 9 Bankruptcy Protection
- June 26, 2012 - News Release, Stockton City Council Adopts Pendency Plan
- Retiree Letter - June 27, 2012, Retiree Health Care Letter
- Retiree Letter - July 16, 2012, Information and resources for retirees receiving medical benefits
- Vendors and Service Providers Letter- June 25, 2012, Pendency Plan
The State of California Legislative Analyst's Office (LAO) has published questions and answers about Local Government Bankruptcy in California. A link to the report is available under External Links below.
If you have questions, concerns, comments or suggestions, please submit your request in writing by completing an Ask Stockton service request form.
This City of Stockton web page last reviewed on --- 1/20/2015