In the heart of Central California lies one of the hardest hit areas of the recession -- the city of Stockton.

And now Stockton is on the verge of becoming the largest city in the United States to declare bankruptcy. With nearly 300,000 people, to has the second highest rate of foreclosures in the country.

“The real estate market where we probably had the biggest price bubble collapse in the country. And that’s had a devastating impact on the city,” said Jeffrey Michael director of Business Forecasting Center at University of Pacific in Stockton.

Stockton is also in the top 10 U.S. cities for crime rate and the city was forced to make huge cuts by slashing 25% of its police force over the last three years.

“The numbers basically just speak for themselves. A decrease in police will always increase crime,” said Charles Harris of the Stockton Police Association.

There was a record number of 58 murders last year and the Stockton Police Association is worried that crime will continue to increase if the budget is not fixed.

“It’s really the perfect storm fiscally for the city. The city of Stockton’s fiscal situation is indeed unique. I don’t think you’ll see a city quite in dire straights that has combined both probably the worst of effects of the recession with some of the riskiest moves of its budget,” said Michael.

Over the last 25 years, the city spent money it didn’t have for generous retiree compensation packages and built projects like a waterfront park with an arena and baseball park.

“Well-intentioned projects, but I don’t think they did the full financial analysis on any of them,” said Michael.

“The Stockton Police Association isn’t very thrilled by how the city’s been managing its budget, how’s it’s been treating its employees -- whether it’s the police department of anywhere else,” said Harris.

The last ditch effort before claiming bankruptcy is a confidential mandated mediation process with creditors and unions and Stockton would be the first city to test the new policy.

“It really means it’s our last best attempt to avoid bankruptcy and falling over the financial cliff,” said the mayor of Stockton, Ann Johnston.

“They put money in things ... It’s all become bust because of their bad decision-making,” said Harris.

But the mayor wants to focus on finding solutions to the current fiscal problem rather then dwell on decisions that were made in the past.

“Right now finger pointing isn’t going to get us anywhere because we all operated with the best knowledge we had,” Johnston said.

But Michael warns that bankruptcy might be inevitable.

“Ultimately the city has to get a sustainable city budget for the long term and hopefully the negotiating process that there and now will lead to those solution and avoid bankruptcy, but it may be unavoidable,” said Michael.

The mayor remains optimistic about the city’s future and believes the city is working to help its citizens.

“Stockton folks are survivors. We have come through a lot of tough times and difficult situations but we stay true to the cores and believe in our city,” said Mayor Johnston.

Michelle Macaluso is part of the Junior Reporter program at Fox News. Get more information on the program here.