California’s Atwater Steps Back From Bankruptcy Push

The City Council in Atwater, California, an agricultural community facing insolvency, suspended discussion of entering bankruptcy after winning concessions from unions that will pare labor costs.

The council voted 5-0 yesterday to stop considering a proposal to invoke a state law requiring mediation with creditors or a declaration of a fiscal emergency. The steps are prerequisites for seeking court protection. It also agreed to ask voters to pass a local sales-tax increase of 0.5 percentage point in March.

“This is a key part of our getting back to fiscal stability,” Mayor Joan Faul said of the proposed tax increase.

The community of 28,000, nestled among dairies and almond groves about 100 miles (160 kilometers) southeast of San Francisco, began its fiscal year facing a $3 million budget deficit. Across California, foreclosures and fallout from the longest recession since the 1930s have depleted property-tax revenue while municipalities are burdened with rising costs.

Under agreements with police and other city workers, Atwater will reduce pay for some by 5 percent and will cut jobs. Three California communities, Stockton, San Bernardino and Mammoth Lakes, have all entered Chapter 9 bankruptcy proceedings since June.