Port city largest in US to declare bankruptcy

THE Californian port city of Stockton is set to become the largest American city ever to declare bankruptcy as officials say mediation with creditors has failed.

THE Californian port city of Stockton is set to become the largest American city ever to declare bankruptcy as officials say mediation with creditors has failed.

The move came after the city council on Tuesday stopped bond payments, slashed employee health and retirement benefits, and adopted a day-to-day survival budget.

The city of 290,000 has seen its property taxes and other revenues decline, while expensive investments and generous retiree benefits drained city coffers. Next year's deficit is anticipated to reach $US26 million.

City Manager Bob Deis said that officials were unable to reach a deal to restructure hundreds of millions of dollars of debt under a new state law designed to help municipalities avoid bankruptcy.

How Stockton found itself so mired in debt can be seen everywhere in the city's core. There is a sparkling marina, high-rise hotel and promenade financed by credit in the mid-2000s, mere blocks from where mothers won't let their children play in the yard because of violence.

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