06/04/2012 11:24 am ET

Stockton City Hall Seized By Wells Fargo As City Edges Closer To Bankruptcy

How bad are things in Stockton, California? So bad that Wells Fargo just seized the building that was supposed to be the town's City Hall.

Stockton acquired its eight-story city hall building for a song in 2007, but never actually moved in its government. In April, the city missed a $197,280 payment on the bonds it issued to pay for the building. Now, Wells Fargo has moved to take the property back, much the same way that the bank repossessed three parking garages earlier this year after Stockton missed a separate bond payment on those.

Such is municipal life in a city that continues to grapple with a $26 million budget deficit -- one that has coincided with cuts to the police force, a surge in violent crime and an unemployment rate of near 20 percent. No, things are not good in a city twice named America's most miserable.

The city has been flirting with bankruptcy for months, and is reportedly trying to devise a contingency plan in case the current round of mediation talks with its creditors don't produce a solution. The contingency plan would allow the city to limp through its day-to-day operations until it reaches a more sustainable arrangement, according to ABC News 10.

One way or the other, the city's day of reckoning could arrive soon. This Tuesday, the Stockton city council will take a vote to decide whether the city manager ought to have the authority to declare the city bankrupt.