Stockton, Calif., is on the verge of becoming the largest American city ever to go bankrupt.
City leaders say mediation with creditors has failed and bankruptcy appears to be the only choice left to save the River Port city of 290,000 people.
With a Chapter 9 bankruptcy filing, officials will still have power over the city's operations and staffing. But a judge will make all decisions concerning the city's debt.
"I had hoped, like everyone else, that we would not be at this place and time, that we would get behind this, that we would have solved our fiscal situation," Mayor Ann Johnston said.
"The whole purpose of filing Chapter 9 is to avoid an uncontrolled chaotic situation," City Manager Bob Deis explained. "Bankruptcy provides the equivalent of a pause button. It retains services and provides structure so you don't have a bunch of lawsuits."
Stockton was thriving, but city leaders learned a hard lesson as they watched the United States sink into a recession and the housing market collapse.
The city had invested in a new promenade, sports arena and hotel. The city's administration had also boosted retiree benefits, while giving city workers and their spouses health care for life.
Looking back at those investments, Mayor Johnston noted, "Just because money is rolling in doesn't mean you spend it all."
Stockton administrators have already laid off 40 percent of the city's employees, one fourth of its police officers and a third of its fire department.
Banks have also repossessed three parking garages and what was to become the city's new $48 million City Hall.
Meanwhile, city official remain optimistic Stockton will bounce back from its financial rut, even in the event they have to file for bankruptcy.
Deis noted that the smaller city of Vallejo recovered from bankruptcy in 2011, just three years after filing for Chapter 9 protection.
"Vallejo is leaner, smarter and they've got the confidence of their citizenry," Deis said. "I think Stockton will be doing the same."