San Francisco Suburb To Declare Bankruptcy

Vallejo's City Council Chooses Bankruptcy As Solution To Fiscal Crisis

(AP)  Vallejo is set to become the largest California city to declare bankruptcy after leaders voted in favor of the solution to its spiraling budget crisis.

The city council voted unanimously Tuesday night following hours of public comment and months of failed negotiations with police, fire and other unions.

City Manager Joseph Tanner and the city's finance director had advised filing for bankruptcy before its fiscal year ends on June 30 because Vallejo faces a projected budget deficit of $16 million and has no money in its reserves.

The San Francisco suburb of 117,000 people also is expected to generate $5 million less in revenue than projected because retail sales and property values are down amid an economic slowdown and slumping real estate market, according to a report issued by Tanner.

Many officials and residents attribute Vallejo's fiscal troubles to overly generous pay and benefits to the city's police and firefighters. The salaries for police and firefighters currently take up 75 to 80 percent of the city's general fund.

Representatives from police, fire and electrical workers unions all argued against the Chapter 9 bankruptcy protection, saying that doing so would only make hiring already short-staffed public safety agencies even harder.

Other critics warned that if a bankruptcy judge does not rule in the city's favor, the legal costs of the proceedings could sink the city further in debt.

The city's mayor, Osby Davis, resisted filing for bankruptcy, arguing that it would stigmatize Vallejo and hurt future economic development. But after months of personally negotiating with the unions, Davis conceded Tuesday that there were no other options that he could find.

"It's time to do something different. I don't like it. I don't want it," he said before voting for bankruptcy protection.

The seven-member council all said the process of making the decision was difficult and emotional.

"Honestly, if there are any more options out there, I would like someone to tell us what they are," said Councilwoman Joanne Schivley, who then recited her phone number twice for people to call her with ideas.

City leaders said filing for bankruptcy will not immediately allow them to fill the potholes on untended streets or add more detectives to the undermanned police force. But they hope, if a judge rules in their favor, it will allow them to restructure union contracts and other debts in a way that allows the city to turn itself around financially within the next few years.

In addition to being the largest California city to declare bankruptcy, Vallejo will be the first city in the state to do so because its revenues cannot cover expenses, experts say.

Desert Hot Springs, a small town in Riverside County, filed for bankruptcy in 2001 after losing a lawsuit. Orange County declared bankruptcy in 1994 after it lost money in a series of bad investments.

"There is a stigma associated with bankruptcy that's not necessarily warranted," said Sajan George, an Atlanta-based financial turnaround consultant who worked on the Orange County bankruptcy.

"My message to residents of Vallejo is, this is not a death knell and should not be equated with that," George said. "We put together a plan for Orange County, issued municipal bonds that allowed county to emerge from Chapter 9 a couple of years later, and now Orange County is thriving."

[standlee5]

Be careful who you put in local office. They''ll spend like drunken sailors and have very little if any budget or finance expertise.

[standlee5]

This is where every city is heading if local govt. don''t CUT THEIR FAT CAT SPENDING and SHRINK the size of govt. Local govt. is meant to provide the basics not feed, clothe, babysit, and basically nanny all it''s resicents. The are going to go down and bring us all with us because they do not generate revenue they consume revenue and we all can''t afford to pay for it anymore.

[algoresarse]

Posted by USBrit at 09:31 AM : May 08, 2008
+ report abuse

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oh i seen the DNC housing plan..its aka as ghetto expansion

Questionnews, please tell me, because I dont know who Eric Cartman is/was, but I did enjoy my short 6 month stay at Mare Island in 70.

[usbrit-2009]

"Democrats'' Housing Plan Faces Bush Veto"

See what I mean notblue???

[usbrit-2009]

The last part is easy. The dems can''t get squat past the last remnants of the repug congress who are on record guaranteeing Shrub veto override proof nos. of votes simply to stop the democrats doing anything. Then of course they are the ones to cry foul.

935 lies. Maybe not one man, but one man''s administration and he''s the captain so the buck stops there.

Price of gas. The war pure and simple. Speculators wouldn''t have a chance to run up the price of gas this much without the general nervousness of world brought on by the war.

Terrorist attacks especially 911. No I do not blame one man for that. It took a world wide clusterfu*k for the intelligence community to let that happen.

Hurricanes. Blaming them on anything but mother nature is stupid. My personal jury is still out on global warming, but it is definitely too early to be blaming the recent higher %age of 4 and 5 power hurricanes to global warming. The catastrophe after Katrina - definitely the Bush regime to start with in immediate response. Many people have contributed since then including the highly republican lobbied insurance industry.

One last thing you don''t mention is the $2 trillion debt to China to pay for Shrub''s pet war and the resultant devaluing of the dollar by 33%. I lay all that at the feet of the Regime.

I hope that helps - gotta go now, we''ll talk again soon I''m sure.

[notblue]

USbrit, just out of curiousity, what do you think about the Dems bashing and blaming the Repubs dayin and day out? Even more obsurd, blaming one man for terrorist attacks, 935 lies,hurricanes, the price of gas, all the while there is a majority of Democrats in both houses? Just Curious.

[randaids]

This move has been coming for months. Unions in Vallejo literally refused to believe the city council when they were told that they had no money. Unions WILL destroy the US economy, and I just don''''t understand why union members can''''t see it that way. Unions were created to hold business owners to a higher work standard, now they just strong arm businesses into giving more and more and more. A business would have folded and moved to China. Vallejo unfortunately doesn''''t have that luxury.


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Posted by spadeisspade at 04:44 PM : May 07, 2008

Sadly the Unions don''t even stand up for the US worker anymore. If they did, they would be after the illegal immigrants, but noooooooooooooo, Labor Unions are hoping to add new members as soon as illegals are amnestied. WE ARE DOOMED.

[randaids]

Far more businesses go bankrupt than municipalities, so I think your thesis is lacking.



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Posted by USBrit at 04:07 PM : May 07, 2008

That is because when governments run out of money, they need only to raise taxes, not revenue. a duuuuh!

[spadeisspade]

This move has been coming for months. Unions in Vallejo literally refused to believe the city council when they were told that they had no money. Unions WILL destroy the US economy, and I just don''t understand why union members can''t see it that way. Unions were created to hold business owners to a higher work standard, now they just strong arm businesses into giving more and more and more. A business would have folded and moved to China. Vallejo unfortunately doesn''t have that luxury.