SACRAMENTO, Calif. – A judge on Thursday approved a plan that allows Stockton to leave bankruptcy protection by eliminating more than $2 billion in long-term debt payments without touching the city’s pension obligations.
The ruling by U.S. Bankruptcy Judge Christopher Klein marked an end to Stockton’s Chapter 9 status, first sought in 2012.
The city successfully negotiated deals with all major creditors except Franklin Templeton Investments, which argued it was being treated unfairly. The investment firm said the city didn’t cut employee pensions while asking the company to walk away from collecting nearly $32.5 million it is still owed.
“Obviously we are disappointed,” Franklin Templeton’s attorney, James Johnston, told the judge about the ruling. “We will evaluate our next steps.”
Klein’s decision could be appealed.
Klein ruled earlier this month that bankruptcy law allows the city to treat pension obligations like any other debt, meaning the city could have chosen to trim the benefits.
However, it did not – a decision that Klein supported, saying the city’s plan to exit bankruptcy did not treat Franklin Templeton unfairly. He also noted that the city had cut employee pay and benefits, which had been higher that some comparable cities; eliminated millions of dollars in retiree health care coverage; and created a pension plan with lower payments for new employees.
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