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Stockton CA bankruptcy - home of ECHL Thunder UPD: heading to fed bankruptcy ct

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06-26-2012, 09:03 PM
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LadyStanley
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Stockton CA bankruptcy - home of ECHL Thunder UPD: heading to fed bankruptcy ct

http://www.recordnet.com/apps/pbcs.d...NEWS/206260322

162 year city Stockton, California, home of ECHL Thunder is facing bankruptcy. This would be the largest civic bankruptcy in California history, and the largest (ever?) in the US. Facing $26mm deficit and must have balanced budget by 7/1.

One of the projects they borrowed for was the arena the Thunder play in. Also the revitalization of the water front nearby.

With the city expected to cut services, it's not exactly clear what the impact might be on the hockey team.

The team pays rent on the arena facility, and are not directly responsible for paying back the bonds/loans. But the fact that the team is one of the leaders in attendance in the league is good news.

The team also uses a city ice arena facility for practice.

Definitely another story to be keeping eye on.


I do have to wonder if with the Sharks involvement (affiliate) of ECHL Stockton, and their geographical closeness, if they might be asked to buy and "take over" the city ice rink (as a way of cutting city budget costs). (And even if the Sharks change ECHL Affiliation this summer to the new San Francisco team, I can still see the Sharks parent organization running the rink.)

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06-26-2012, 09:19 PM
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Although this is smaller then the 1994 bankruptcy of Orange County - although that was due to $2B in investment losses due to speculative (and illegal) investments, rather than structural deficits due to plunging sales and property taxes combined with rising employee, benefits and pension costs.

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06-27-2012, 12:41 PM
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http://www.recordnet.com/apps/pbcs.d...NEWS/206270321

Tuesday night, city council voted to head toward chapter 9 bankruptcy. (Bankruptcy should be filed by the end of the week.)

Bond (re-)payments (including on ECHL team's arena) are stopped.

A lot of questions and few answers (especially as it pertains to hockey in the city).

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06-27-2012, 12:52 PM
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Since this is the City going bankrupt, instead of the team, it's a very different situation (from my read) from the various NHL bankruptcy situations we've seen over the last decade.

I'm not a lawyer, but it seems to me that unless a court invalidates the ECHL team's lease to play in the arena, that the solvency of the city _shouldn't_ directly affect whether the team plays or not. I'm not sure why the city being bankrupt should invalidate the lease, but I'm sure some of our resident board lawyers can clarify situations like that for me.

The bond repayment suspension negatively affects the bond-holders, not the ECHL team. I don't _think_ the bond-holders can really "repossess" the arena and kick out the ECHL team... and even if they could, would there be any incentive to kick out a paying tenant? That revenue stream might be the bond-holders' best hope for recovering at least some of their sunk costs, right?

Then again, we've seen that many things take odd turns once they hit bankruptcy court.

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06-27-2012, 01:07 PM
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Another issue is the city-run/owned ice rink the team uses for practice. It is possible that the city could just "board it up" if it's more cost effective.

But as it's "early days" yet, nothing for sure is known how it will/won't impact team.

Obviously, income from a team paying rent is better than not.

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06-27-2012, 01:14 PM
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The team still has a lease on the arena so my guess is that they will keep paying the lease and go on as normal, unless its a Glendale situation where they are paying the team to be there. Now if someone buys the arena from the city and doesn't want the team in there thats a different case.

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06-27-2012, 01:34 PM
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Just wait until Los Angeles or the entire State of California goes bankrupt. It seems inevitable.

Fortunately AEG owns Staples Center.

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06-27-2012, 02:56 PM
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That is too bad. Couldn't the arena theoretically be locked up by the city leaders if they wanted?

Haven't cities learned that arena's are terrible investments? Global I think proved that to us. If you want one it's really good to find a private type investor instead of puting the city on the hook.

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06-27-2012, 03:04 PM
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As someone whose been applying for municipal government work for a while now, I definitely understand a lot of the pain that a lot of the folks over there are going to be experiencing. They've likely already had hiring freezes, cutbacks, and understaffing issues, and this is just going to make things worse for all parties involved.

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06-27-2012, 06:05 PM
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Quote:
Originally Posted by Green Men Rule View Post
That is too bad. Couldn't the arena theoretically be locked up by the city leaders if they wanted?

Haven't cities learned that arena's are terrible investments? Global I think proved that to us. If you want one it's really good to find a private type investor instead of puting the city on the hook.
Sure. But there's a contract with team (and other concerts/tenants have theirs), so I think it highly unlikely.

Now perhaps the team will have to pay rent into an escrow account.

But no statement from team on anything regarding city (pending) bankruptcy.

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06-27-2012, 07:55 PM
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Quote:
Originally Posted by No Fun Shogun View Post
As someone whose been applying for municipal government work for a while now, I definitely understand a lot of the pain that a lot of the folks over there are going to be experiencing. They've likely already had hiring freezes, cutbacks, and understaffing issues, and this is just going to make things worse for all parties involved.
The job economy isn't great all over the country. It's no secret people are spending less this paast decade than say the 90's. I guess I just wonder how a city can actually end up bankrupt? The building of the arena didn't help I guess. But in the timeframe it was built the economy was in okay shape on a national level.

Don't know who owns the arena but if it is the city I see no way how they can dance around the paying for rent idea. I do know Stockton just got a new owner for the team within the last 2 years. Don't knoew if the guy is loaded or anything but at his Q & A he seemed pretty invested. The team draws well, now i'm not so sure if a lot of those tickets weren't freebees

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06-27-2012, 08:16 PM
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Quote:
Originally Posted by Green Men Rule View Post
The job economy isn't great all over the country. It's no secret people are spending less this paast decade than say the 90's. I guess I just wonder how a city can actually end up bankrupt? The building of the arena didn't help I guess. But in the timeframe it was built the economy was in okay shape on a national level.

Don't know who owns the arena but if it is the city I see no way how they can dance around the paying for rent idea. I do know Stockton just got a new owner for the team within the last 2 years. Don't knoew if the guy is loaded or anything but at his Q & A he seemed pretty invested. The team draws well, now i'm not so sure if a lot of those tickets weren't freebees
Actually, local and state governments are cutting back more than the private sector, which is one of the reasons why American jobs numbers remain low. If municipalities and states were hiring at the same rate as the private sector, the overall unemployment rate would be down significantly. It's just that state and local governments are always a couple years behind the curve of economic matters as they inherently get hit by reduced tax income at slower and compounding rates. A lot of governments are just now getting hit by the economic downturn that hit the private sector from 2008-2010 when it comes to actually having to make a lot of major cuts, and the slow recovery that the private sector has been experienced will thus likely be delayed by several years as a result for state and local governments.

Not to say that 2008-2010 was easy-peasy for states and municipalities, but it wasn't as bad on the public sector as it was on the private sector, and now it's vice versa where the public sector is getting the brunt of it compared to the private sector.

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07-04-2012, 02:45 PM
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Didn't realise cities could declare bankrupcy, considering they can just increase taxes. Is this possible in Canada? I've never heard of it before. In BC, municipalities can't run a deficit.

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07-05-2012, 12:39 AM
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Quote:
Originally Posted by RTN View Post
Didn't realise cities could declare bankrupcy, considering they can just increase taxes. Is this possible in Canada? I've never heard of it before. In BC, municipalities can't run a deficit.
Not in California.

Tax increases (most types) require voters approval in the state. (See Prop 13, Prop 9 from the late 1970s. These two propositions prohibited cities from increasing property taxes to the "current" value. For instance, I bought my place in 1988. The assessed value has only increased about 50% of purchase price, while if I put it on the market tomorrow, the price would be about 400% of what I bought it at -- which is down from max a few years ago of closer to 600%. And if I move, in state, many of the counties will allow me to "transfer" that 1988 date of value, not the 2012 value.)

You have to vote to increase property taxes, sales taxes (base rates, special districts -- the later generally requiring a "sunset" date).

Stockton has been a "leader" in foreclosures in the past few years in state, so they've lost a lot of property value and lost property tax revenue.

And the state is still recovering from economic woes.

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07-05-2012, 11:09 AM
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Quote:
Originally Posted by RTN View Post
Didn't realise cities could declare bankrupcy, considering they can just increase taxes. Is this possible in Canada? I've never heard of it before. In BC, municipalities can't run a deficit.
Pittsburgh has done this already. I believe we are still in state receivership....the problem is, you can only raise taxes so high. A lot of the problems are union contracts they sign with the various municipal authorities. Here, for example, our transit system is nearly bankrupt due to the retirement contracts & overall costs. Not to mention, mismanagement at the top.

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07-06-2012, 10:12 PM
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Quote:
Originally Posted by Green Men Rule View Post
That is too bad. Couldn't the arena theoretically be locked up by the city leaders if they wanted?

Haven't cities learned that arena's are terrible investments? Global I think proved that to us. If you want one it's really good to find a private type investor instead of puting the city on the hook.
Yes. The "If they didn't fund the arena, they would be bankrupt" argument.

Too bad its easy to fall for the straw man than to deal with real issues.

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07-11-2012, 07:36 PM
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Stockton is one of THREE cities in California that have filed bankruptcy in the last couple of weeks.

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07-11-2012, 07:49 PM
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Originally Posted by LadyStanley View Post
Stockton is one of THREE cities in California that have filed bankruptcy in the last couple of weeks.
There will be many, many more across the country in the years ahead. It will be especially difficult for many municipalities and states as pension liabilities finally turn into pension cashflow.

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03-25-2013, 12:33 AM
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http://abclocal.go.com/kgo/story?sec...rticle-9039622
Monday, the city goes to Federal chapter 9 bankruptcy court.

Increasing population, housing market, putting in state of the art arena (2005) and new water front baseball stadium, and other (pension, mainly) related obligations resulted in $1billion of debt.

Then the recession hit (17.5% unemployment), housing market crashed. Among the highest rate of homicides in state.

They've cut a lot of staff, services, negotiated some settlements, but some bond holders would not take the $0.17-0.18 per dollar offered. A number of parking structures have been foreclosed on by lenders. And they lost their new high rise building (where city hall was relocating to).

Quote:
Last summer, the city began negotiating with creditors, a requirement before entering Chapter 9 bankruptcy. Ten employee unions agreed to temporary wage and benefits cuts.

Retired employees have also been asked to pick up a larger share of health care premiums, closing a $540 million retiree health care cost liability.

But the holders of the biggest share of the debt were the companies that in 2007 insured nearly $165 million in pension bond obligations to allow the city a lower interest rate and make them stable for investors. They were unable to negotiate a deal and want the city to avoid bankruptcy, which would likely allow Stockton to avoid repaying the debts in full.

Officials for the largest creditor, Assured Guaranty, said the city offered them 17 to 18 cents on the dollar for bonds that run through 2048, a deal they plan to argue in court is unacceptable. They say the city should further cut costs and raise taxes and point to city subsidies for the arena and $7 million in uncollected parking tickets.

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03-25-2013, 12:37 AM
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could be instructive as I think most now expect Detroit to go through a managed bankruptcy in the near future, which would be the largest civic bankruptcy in history by some margin and will certainly have some sort of impact on the Red Wings.

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03-25-2013, 10:22 AM
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So what will (realistically) happen to the city? Will it become a slum or ghost town?

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03-26-2013, 12:01 AM
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Day 1

http://abclocal.go.com/kgo/story?sec...rticle-9041023

Quote:
Lawyers for the California city of Stockton said Monday it has cut its budget and services to the bone and has no choice about trying to become the most populous U.S. city to enter bankruptcy.

Creditors countered that the city has failed to cut enough spending or even seek a tax increase to avoid Chapter 9 bankruptcy protection.

The arguments came as the city faced off Monday with its creditors in U.S. Bankruptcy Court at a trial to decide the issue.
...
The creditors want the city to avoid bankruptcy, which would likely allow Stockton to avoid repaying the debts in full.

The trial will determine whether the city negotiated with its creditors in good faith before filing for Chapter 9 protection. The trial is expected to last four days.

Local newspaper account
http://www.recordnet.com/apps/pbcs.d...NEWS/130329924
Quote:
Stockton's lead bankruptcy attorney Marc Levinson said Stockton on June 28, when it filed Chapter 9, had already cut its police force by 25 percent, the fire department by 30 percent and other non-public safety city departments by 43 percent.

Bankruptcy was the only option, Levinson said.

Attorneys for the creditors said in their opening statements that the city never asked residents to raise taxes. Deis and other city leaders were dead-set on making the investors pay from the moment they considered bankruptcy.

The California Public Employees' Retirement System (CalPERS), which manages the city's employee pensions, was conspicuously left out of the city's plans, the creditors contend, arguing that the city didn't enter bankruptcy in good faith.

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09-15-2013, 06:35 PM
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http://www.recordnet.com/apps/pbcs.d...s+Headlines%29

Update.

Stockton city is trying to renegotiate contracts with minor league baseball team (Ports) and the ECHL Stockton Thunder for using the city owned sports facilities, in part because (in the Ports case) the monies received does not cover the expenses (stadium upkeep) the city pays. (The city even re-negotiated deal with the Asparagus Festival in an effort to come up with a plan to exit bankruptcy.)

And in an echo of NHL Coyotes saga, the additional funds (like $500k difference!) might be considered a subsidiary to the Ports from the city. The Ports point to the fact that the city can schedule events on non-game days, as well as sell the naming rights to the stadium, to get additional income. (SMG has brought in ONE event in 3 years to stadium.) Ports are also fighting (legal) efforts (through bankruptcy court, via subpoena) to have their books opened. (Majority owner is from Dubai.) Naming rights were initially look to be sold at the height of the recession; might be better financial situation now.


More specific to the hockey team, the ECHL Stockton Thunder, the owner is not commenting on the process due to a confidentiality agreement in place. $1.3m is paid annually to SMG for upkeep of arena.

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09-25-2013, 11:25 AM
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http://www.recordnet.com/apps/pbcs.d...61/-1/A_NEWS06

New Thunder deal reached. City paying about $200k less than under old deal.

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