Bankrupt Stockton Plan Favors Retirees Over Creditors

Stockton, California, unveiled its plan to exit bankruptcy by raising taxes and paying some creditors less than they are owed while maintaining its pension obligations to city employees.

Under the proposed plan of adjustment posted yesterday on Stockton’s website, bondholder Franklin Resources Inc. would have the option of settling with the city or taking control of a park and two golf courses that were pledged as collateral for $35.1 million the company is owed. The city says it can only pay $500,000 of the $2.9 million it owes every year on the bonds.