STOCKTON, CA - Fitch Ratings, a Wall Street investment firm, downgraded Stockton's water bonds to essentially junk bond status.
The firm's website cited the city council's Tuesday night vote to give City Manager Bob Deis the authority to declare bankruptcy if the mediation with creditors fails to reach an agreement to give the city solvency.
More than $252 million in water bonds was downgraded to below investment grade. The bonds were given to the city for its Delta Water Supply Project, which started operating last week by pumping water from the Delta and making clean drinking water for Stockton.
News10 placed calls into city hall for comment after working hours, but did not receive a response from the mayor or council members before this post.
Former city manager Dwane Milnes said he doesn't see how the legal water bonds could be effected by a bankruptcy filing.
"Water bonds are financed through water rates," Milnes said.
"In California, water rates are restricted, so it can only be used for that. While the city may file for bankruptcy, the bankruptcy involves the general fund. It can't reach into the water fund to pay its bills."
The Fitch Ratings is based in New York City.