Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Fitch: Stockton Bankruptcy Likely To Affect Future Municipal Bankruptcy Negotiations
Author: Joel R. Glucksman
Date: November 22, 2013
Key Contacts
Back
A new analysis asserts that court approval of Stockton, California’s plan of reorganization under Chapter 9 of the bankruptcy law could have far-reaching implications for future municipal bankruptcy cases, particularly with regard to labor negotiations.
Fitch Ratings recent report, “Stockton Bankruptcy Perspectives,” discusses the ways in which negotiations among labor unions, employees, bondholders, and taxpayers – who are all being asked to contribute to the city’s recovery – will affect negotiating power among bankruptcy creditors in the future. According to the report, their examination reveals that, in future bankruptcy cases, municipal workers who are protected by union contracts may experience more challenges in seeking priority repayment status over other creditors. This is the struggle that is currently being played out in the Detroit bankruptcy case, and Fitch notes that the outcome of Stockton’s reorganization struggle could affect the future negotiating power of labor unions and other employee creditors.
“Stockton’s ability to achieve significant concessions from labor under threat of bankruptcy provides food for thought about incentives in other potential cases,” said Amy Laskey, Fitch managing director. “The specter of bankruptcy may have motivated labor, although not bondholders, to negotiate.”
Laskey may largely be referring to Stockton’s elimination of post-employment benefits, which were negotiated in the past with current employees and retirees.
Stockton is currently the country’s second-largest city to seek Chapter 9 municipal bankruptcy protection – following Detroit – but it is making headway in exiting bankruptcy. The city’s voters recently approved a ballot measure to raise Stockton’s sales tax to 9 percent. The increase will allow the city to generate roughly $28 million annually, enabling it to restore public services, cover the cost of law enforcement needs, and take it a step closer to emerging from bankruptcy.
Kathy Miller, a Stockton council member, recently told Bloomberg that the measure would help the city enter “recovery mode.” Without the approved legislation, Stockton would have been forced to implement more service cuts, including the elimination of the city’s library system, community center programs, and an additional 14 percent cut in the fire department, she told the news source.
- Practices: Bankruptcy & Creditors' Rights
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Does Your Homeowners Insurance Provide Adequate Coverage?
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Understanding the Importance of a Non-Contingent Offer
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
Fred D. Zemel Appointed Chair of Strategic Planning at Scarinci & Hollenbeck, LLC
Business Transactional Attorney Zemel to Spearhead Strategic Initiatives for Continued Growth and Innovation Little Falls, NJ – February 21, 2025 – Scarinci & Hollenbeck, LLC is pleased to announce that Partner Fred D. Zemel has been named Chair of the firm’s Strategic Planning Committee. In this role, Mr. Zemel will lead the committee in identifying, […]
Author: Scarinci Hollenbeck, LLC
Novation Agreement Process: Step-by-Step Guide for Businesses
Big changes sometimes occur during the life cycle of a contract. Cancelling a contract outright can be bad for your reputation and your bottom line. Businesses need to know how to best address a change in circumstances, while also protecting their legal rights. One option is to transfer the “benefits and the burdens” of a […]
Author: Dan Brecher
What Is a Trade Secret? Key Elements and Legal Protections Explained
What is a trade secret and why you you protect them? Technology has made trade secret theft even easier and more prevalent. In fact, businesses lose billions of dollars every year due to trade secret theft committed by employees, competitors, and even foreign governments. But what is a trade secret? And how do you protect […]
Author: Ronald S. Bienstock
What Is Title Insurance? Safeguarding Against Title Defects
If you are considering the purchase of a property, you may wonder — what is title insurance, do I need it, and why do I need it? Even seasoned property owners may question if the added expense and extra paperwork is really necessary, especially considering that people and entities insured by title insurance make fewer […]
Author: Patrick T. Conlon
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Fitch: Stockton Bankruptcy Likely To Affect Future Municipal Bankruptcy Negotiations
Author: Joel R. Glucksman
A new analysis asserts that court approval of Stockton, California’s plan of reorganization under Chapter 9 of the bankruptcy law could have far-reaching implications for future municipal bankruptcy cases, particularly with regard to labor negotiations.
Fitch Ratings recent report, “Stockton Bankruptcy Perspectives,” discusses the ways in which negotiations among labor unions, employees, bondholders, and taxpayers – who are all being asked to contribute to the city’s recovery – will affect negotiating power among bankruptcy creditors in the future. According to the report, their examination reveals that, in future bankruptcy cases, municipal workers who are protected by union contracts may experience more challenges in seeking priority repayment status over other creditors. This is the struggle that is currently being played out in the Detroit bankruptcy case, and Fitch notes that the outcome of Stockton’s reorganization struggle could affect the future negotiating power of labor unions and other employee creditors.
“Stockton’s ability to achieve significant concessions from labor under threat of bankruptcy provides food for thought about incentives in other potential cases,” said Amy Laskey, Fitch managing director. “The specter of bankruptcy may have motivated labor, although not bondholders, to negotiate.”
Laskey may largely be referring to Stockton’s elimination of post-employment benefits, which were negotiated in the past with current employees and retirees.
Stockton is currently the country’s second-largest city to seek Chapter 9 municipal bankruptcy protection – following Detroit – but it is making headway in exiting bankruptcy. The city’s voters recently approved a ballot measure to raise Stockton’s sales tax to 9 percent. The increase will allow the city to generate roughly $28 million annually, enabling it to restore public services, cover the cost of law enforcement needs, and take it a step closer to emerging from bankruptcy.
Kathy Miller, a Stockton council member, recently told Bloomberg that the measure would help the city enter “recovery mode.” Without the approved legislation, Stockton would have been forced to implement more service cuts, including the elimination of the city’s library system, community center programs, and an additional 14 percent cut in the fire department, she told the news source.