April 14--STOCKTON -- The city can continue to withhold payments of unused vacation days and sick time to retiring police officers as it attempts to avoid bankruptcy, a civil court judge ruled Friday.
As a result, the city can continue mediation with its creditors without having the entire process put in jeopardy, said John Holtzman, an attorney representing the city.
"This is about the balance of harms," he said in court. "It's not realistic to give money to one group to the detriment of other employees. ... Doing so would be wildly disruptive to the mediation process."
The city maintains if it is forced to pay more than $300,000 owed to the potentially 20 or so officers eligible to collect the lumped compensation this year, it would plunge the city headfirst into bankruptcy.
The ruling from Superior Court Judge Lesley D. Holland prevents retiring officers from cashing out unclaimed vacation hours and sick time accrued over the years in one lump.
However, the city continues making such payments to active-duty police as part of its day-to-day operations.
Although a procedural decision went against them Friday, the police union's overall lawsuit against the city for breach of contract regarding the withholdings remains alive.
Representatives for the Stockton Police Officers Association argue the city has a contractual obligation to honor its decades-old promise to employees. The payments were suspended in mid-February and total $321,000, said David Mastagni, attorney for the police union.
Officials say Stockton owes about $1 million to all city employees who have retired since Feb. 16.
The amount would rise to more than $6 million if all eligible Stockton employees elected to retire and attempt to cash out their unused compensation at once, according to Stockton representatives.
Holtzman said mediation is necessary because the overwhelming majority of Stockton's general fund, 80 percent, goes to compensating police officers and firefighters.
Representatives of Stockton, which first declared a fiscal state of emergency in 2010, said the city's bleak financial outlook has led it to the point of reducing officers' salaries, having furlough days and not filling vacancies.
"There is no political reason to lay off police officers and firefighters," Holtzman said. "No city council would ever sign off on it if it didn't absolutely have to."
The union argues the city opted to avoid seeking concessions with police and instead cut officers' pay roughly 30 percent in declaring an emergency. Additionally, they say, the city's financial house is in such disarray there's no way of knowing how much money the city has to its name.
"The city can't give you an exact day for when it will run out of money," Mastagni said. "All they've done is produce speculation. ... They city doesn't have documents about its cash flow, all it's done is say, 'Take our word for it.' "
The police union contends money that could have gone to retiring officers was spent instead to enter the mediation process to avoid bankruptcy by hiring outside consultants.
Despite the day's ruling, Mastagni said the union's position remains strong.
"We still have a strong likelihood of success in regards to a breach of contract lawsuit. ... What the judge ruled today was that irreparable harm isn't being done to the officers by continuing to suspend these compensation payments," he said.
Even with mediation, the city is staring down the barrel of Chapter 9 bankruptcy, he said.
"The writing's on the wall," Mastagni said. "The city is filing for bankruptcy."
Holtzman said the situation is bleak but that the city is making every effort to avoid declaring fiscal insolvency.
Friday's ruling comes one day after a court mandate from Superior Court Judge Roger Ross allowing Wells Fargo to repossess three downtown parking garages after Stockton defaulted on mortgage payments on them.
Contact reporter Jordan Guinn at (209) 546-8279 or [email protected]. Visit his blog at recordnet.com/crimeblog.
Copyright 2012 - The Record, Stockton, Calif.
