Shock doctrine comes home to Central Valley
by Brian Leubitz
In many ways, it is hard to fault the current City leadership. Sure, some of them have been around a while and had a hand in some bad decisions. However, while Stockton over leveraged in search of the growth gods, they were doing what they thought was the American way. They were building a community based upon construction and growth. And when the bubble burst, they were out on the edge. And now they are going through an “orderly mediation”
The City Council is expected to approve an eight-point plan this evening that calls for the city to suspend approximately $2 million in bond payments through the end of the current fiscal year. The plan also calls for the city to embark on two months of private discussions with its bond holders, city employee unions and any other creditors with at least $5 million in claims against the city to determine if parties can reach accommodations that will allow Stockton to avoid bankruptcy.
If the council agrees – and it really has no other viable option – Stockton will become the first city in the state to undergo the AB 506 process, a formalized mediation period designed to help jurisdictions restructure their debts and avoid municipal bankruptcy.(Modesto Bee)
At this point, Stockton is in a corner. Under state law, they have few viable choices. Labor will have to take a big cut, whether through this mediation process or through bankruptcy. But this is about more than some bond holders. Stockton made a deal with its employees. In exchange for taking lower salaries, they would get better long term benefits and stability. Turns out that they are going to fail on both accounts.
I doubt this process will make many on Wall Street happy, but even if they are going to lose a few bucks, they do get to continue their attacks on the middle class and organized labor. And so far, they seem to be winning even when they lose.