Stockton Pension Cuts Sought by Sonoma County Roads Group

Stockton, California’s plan to fully pay employee pensions after leaving bankruptcy may lead to more unfilled potholes and unpaved streets, according to a Sonoma County citizens’ group that lobbies for increased spending on roads.

Save Our Sonoma Roads filed a brief yesterday ahead of a May 12 hearing where Stockton will seek approval of its plan to pay some creditors less than they are owed while meeting pension obligations to municipal employees. Bankrupt California cities may struggle to pay for road maintenance unless they can cut pensions, Save Our Sonoma Roads said.

“If pensions cannot be impaired in a bankruptcy proceeding, the ability of many local governments to function will be called into question,” the group said in the filing in Sacramento, California, in support of Franklin High Yield Tax Free Income Fund, which is opposing Stockton’s debt plan.

Marc A. Levinson, a lawyer for Stockton, the seat of San Joaquin County, urged U.S. Bankruptcy Judge Christopher M. Klein to throw out the group’s brief. Save Our Sonoma Roads has “no inherent right” to submit the filing and is trying to “cajole, shame or bully” Stockton officials into taking pension money for road repairs, Levinson said in a motion.

Bankruptcies in Stockton, San Bernardino and Vallejo in California, and in Detroit “raise the most fundamental issues of local governance in our time,” highlighting the cost of workers’ benefits, according to Save Our Sonoma Roads. While it’s “sympathetic to public employees,” the group said residents’ desires “deserve similar consideration.”

A hearing on the brief is set for May 1. Stockton, a city of about 300,000 about 80 miles (130 kilometers) east of San Francisco, filed for bankruptcy in 2012. It was the largest city in the U.S. to pursue municipal bankruptcy until Detroit filed in July.

The case is In re City of Stockton, California, 12-bk-32118, U.S. Bankruptcy Court, Eastern District of California (Sacramento).