Diablo Grande's Chapter 9 case has shifted into a contested eligibility phase. Stanislaus County, asserting about $2.19 million in unpaid ad valorem property taxes secured by statutory liens, objected to the petition and asked the court to dismiss the case, arguing the district failed Section 109(c)'s state-authorization, insolvency, and good-faith negotiation requirements in the County petition objection.

At the April 15 status conference, the court found the debtor had complied with the Chapter 9 notice requirements under 11 U.S.C. § 923, set status reports for June 17, continued the status conference to June 24, and set a December 2 evidentiary hearing setting conference in the April 15 minute entry. That puts the threshold question of whether the municipal debtor can remain in Chapter 9 on a litigation path rather than a purely administrative one.