Stockton was the first city to test a new state mediation law, Assembly Bill 506, which is less than six months old.
Under the law, municipalities considering bankruptcy must first negotiate behind closed doors with creditors for up to three months, with the goal of settling debts without filing for Chapter 9 protection.
If the city is eventually able to reach a deal through mediation, Deis said, City Council members could modify the budget to reflect the deal, or they could adopt the budget and come back in July to modify it.
Officials say they are optimistic, even if they decide to file for bankruptcy. They point to Vallejo, a smaller California city that filed for Chapter 9 protection in 2008 and emerged from bankruptcy last year.
"Vallejo is leaner, smarter and they've got the confidence of their citizenry," Deis said. "I think Stockton will be doing the same."
Benedetti said Stockton has some things going for it: An excellent location, successful inland port and good university.
"It has some promising economic resources, so it's not all down and out," he said.