Stockton Considers Tax Hike to Help City through Bankruptcy

Officials in Stockton, CA put forth a tax plan last week that would aim to help improve city life and also buoy the city through its Chapter 9 bankruptcy filing.

When Stockton filed nearly a year ago, it was the largest municipal filing in United States history. That title has since been usurped by Jefferson County, AL, but Stockton still remains an example of a cash-strapped California city trying to make its way back to solvency.

Doing so won't be easy and it seems the Stockton City Council is taking an only slightly less populist approach to reorganizing its debt than Detroit's Emergency Manager Kevyn Orr. Orr's plan, which is still being negotiated, aims to usher Detroit back to the black on the backs of bondholders without asking too much of residents. The lynchpin in Stockton's plan, however, is a sales tax hike to 9% from 8.25%, the proceeds of which would be used to hire 120 police officers, fund other safety programs and, more generally, help Stockton exit bankruptcy with a reorganization plan that can win court approval.

Stockton isn't asking only its residents to help with its debt woes, however. The City Council's budget plan also includes $12 billion in debt payment defaults. So far while the city hasn't missed its obligations to the California Public Employees' Retirement System (CALPERS), the state pension fund, it has missed $12 million in debt payments.

- Jacob Barron, CICP, NACM staff writer

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