Gadsden Post: Stockton Discourages Employee Retirement Amid Bankruptcy Review

Another one bites the dust.

The city manager of Stockton, California, discouraged employees from seeking early retirement after he recommended that lawmakers start negotiations with creditors to avert bankruptcy.

It’s “not at all clear that there would be an advantage to prematurely retire,” Bob Deis said in a letter dated Feb. 24 and posted on the city’s website. He also said he was temporarily suspending payouts for unused vacation, sick time and holiday leave usually collected at retirement.

The City Council today plans to consider a type of mediation that lets creditors participate, required under a new state law as the first step toward a Chapter 9 bankruptcy filing. Deis, who urged the council to begin the process, said he’d also recommend withholding $2 million in debt payments due in March.

“Some employees may believe that if they quickly retire, they will avoid any reductions in their benefits, such as retiree health insurance or other separation payments,” Deis said in the letter. “Other than the leave buyout issue, I fully expect no impact to paychecks and benefits as we go through” the mediation process.

Stockton, a farming center about 80 miles (130 kilometers) east of San Francisco, has fought to avert bankruptcy by shrinking its payroll, including 25 percent of its workforce. The city of 292,000 has an unfunded liability of $450 million in its retiree health program and has issued $319 million in debt directly or indirectly supported by its general fund, Deis said last week.