State-mandated mediation between the City of Stockton and its creditors was set to expire at midnight on Monday, moving the Central Valley community one step closer to becoming the largest city in the country to go bankrupt. If the 90-day mediation fails, the City Council is set to vote Tuesday evening on a new budget to cover a $26 million deficit in case of bankruptcy. City officials would then have until July 1 to officially file for bankruptcy protection. Once a booming bedroom community for San Francisco Bay Area commuters, the city was hard hit by falling housing prices, enduring one of the highest foreclosure rates in the country. Since 2009, the city has cut some $90 million from its budget, including deep cutbacks to municipal staff, police and fire departments.