Even as the City of Stockton moves through the AB 506 process, it is keeping the door open to file for bankruptcy, should it not achieve sufficient cost savings from its creditors. On Tuesday, the city manager will ask for authority to file for Chapter 9 Protection.

Bankruptcy remains the last resort for the city, and should they declare bankruptcy they will set a new benchmark for the largest municipal bankruptcy in the nation. But the city is facing another $26 million shortfall and the prospects of overcoming some of their structural imbalances hinge on the AB 506 process. Should they fall short of their goal, they will face the very real possibility of insolvency.

The authority that Bob Deis is asking the council for includes the ability to shift the city to a day-by-day scheme. That would enable the city to remain relatively afloat despite any uncertainties that lie ahead.

From the Record Net:

The City Council on Tuesday will consider granting City Manager Bob Deis authority to file Stockton’s Chapter 9 bankruptcy protection within a month if officials are unable to broker a deal with the city’s creditors by then.

The mediation behind closed doors is scheduled to continue through June 25, but Deis said in a report to the council that the city needs the option to file bankruptcy in place long before that.

Read the full article here.