Stockton, Calif. officials are hopeful of a settlement with their financially troubled city's creditors to avoid a municipal bankruptcy filing, Mayor Ann Johnston said after the city manager projected a larger city budget gap, Reuters reported yesterday. Mediation between Stockton and its creditors could wrap up at the end of this month unless a majority of the parties in the talks request an extension. Stockton is the first big city in California to test a new law requiring mediation after its leaders in February endorsed a restructuring plan for the city's finances. The law requiring mediation was approved in response to Vallejo, California's controversial bankruptcy filing in 2008. Stockton's restructuring plan includes mediation and, to the shock of many in the U.S. municipal debt market, defaulting on some debt payments during the remainder of the current fiscal year through June.
