Vallejo, Calif. files for bankruptcy protection

SAN FRANCISCO — The city of Vallejo filed for bankruptcy protection Friday to deal with a ballooning budget deficit caused by soaring employee costs and declining tax revenue.

The San Francisco Bay area suburb of about 120,000 residents became the largest California city to seek bankruptcy protection.

Mayor Osby Davis said the city's attorneys filed papers seeking Chapter 9 bankruptcy protection in federal court in Sacramento.

"We've exhausted all avenues at this point, and this is all we had left," Davis said. "I had hoped to avoid it all the way up until yesterday. It's something we can't avoid ... We can't pay our bills."

Vallejo will ask the judge to set a June 9 deadline for creditors to challenge the filing, said Marc Levinson, the city's bankruptcy attorney. If there are no objections, the city automatically enters bankruptcy protection.

The police and firefighter unions plan to file a legal challenge, arguing that the city's finances aren't as dire as officials claim and there are other ways to fix the budget deficit, said Mat Mustard, vice president of the Vallejo Police Officers Association.

"Filing for bankruptcy is and was unnecessary," Mustard said. "Yes, I believe they have a financial crisis, but I think they're turning their crisis into a catastrophe by going into bankruptcy."

The seven-member City Council voted to authorize the city manager to file for bankruptcy protection on May 6 after months of failed negotiations with its police and firefighters unions.

After that vote, city officials and union representatives continued to meet in hopes of reaching a last-minute deal to stave off the bankruptcy filing, but the two sides couldn't come to an agreement.

Vallejo, a mostly working-class city about 30 miles northeast of San Francisco, faces a $16 million budget deficit in its fiscal year starting July 1.

The foreclosure crisis and economic downturn have caused a sharp decline in revenue from sales tax, property tax and development fees.

Many officials and residents blame Vallejo's chronic financial problems on labor contracts that they say provide overly generous pay and benefits to the city's police officers and firefighters. Those city workers comprise about three-quarters of Vallejo's general fund.

The unions say compensation for Vallejo's public safety employees is in line with that of other Bay Area cities, and blame the fiscal crisis on government mismanagement and poor decisions by previous city councils.

Other cities around the country could find themselves in the same position as Vallejo because they're also struggling with skyrocketing employee expenses and falling revenues, experts say.

"If the economy doesn't turn, you're going to see other cities in the same spot," said Marcia Fritz, vice president of the California Foundation for Fiscal Responsibility. "You're seeing a lot of cities and counties where reserves are being drawn down to pay for benefits."

Union representatives did not have an immediate comment on Friday's filing, but they previously said they would challenge it and argue that the city isn't insolvent. They say city officials rejected offers of salary cuts that would help solve the financial crisis.

In addition to being the largest California city to file for bankruptcy protection, Vallejo is the first to do so because its revenues cannot cover expenses, experts say.

Orange County filed for bankruptcy protection in 1994 after it lost money in a series of bad investments; the Southern California town of Desert Hot Springs filed in 2001 after losing a lawsuit.

Some officials worry that seeking bankruptcy protection could damage the city's reputation and ability to attract residents and businesses, but others say the city could eventually emerge stronger and more financially secure.

"The mismanagement of the city for so long has tarnished our reputation, not bankruptcy," said Councilwoman Stephanie Gomes. "Bankruptcy gives us the opportunity to fix that mismanagement and put a long-term plan in place to ensure true growth and recovery."

Comments

[Hirnlego]

People sleep in cars in rich US city

http://www.presstv.ir/detail.aspx?id=56812&sectionid=3510212

[2sleepy]

Police and Fire wages and benefits consume 71% of all revenue Take a look here http://www.sfgate.com/webdb/vallejo/ As you can see, a number of Police and Fire employees make over 200k a year, the median income for a family in Vallejo is under 65K. California prison guards were the first to get the 3% at 50 retirement, their union is very strong, they donate huge amounts to politicians and don't doubt for a minute that their is a quid pro quo. (when you read about California prisons being overcrowded, it's not that there are more crooks in Cali, its just that the prison guard union donates huge amounts of money to 'law and order candidates' who make sure that no alternatives to prison are considered, even for non-violent offenders) Once the CCPOA got 3% at 50, every other public safety agency jumped on the bandwagon insisting that they get the same package. For a few years no one noticed or complained, property tax revenue was good, and the California retirement system was flush with cash and footing most of the bill, then the housing bubble burst, and Cal Pers investments failed, and Cities had to pick up the tab for this outrageous retirement package which is just a tad under 30% of each employees salary. Throw in a great benefit package, fully paid medical and unions unwilling to renegotiate contracts in any meaningful way and you have a city in financial ruin

[unscum]

Corruption at the federal level, corruption at the state level. It surprised the heck out of me to find out that political corruption in the United State is as endemic as it is in the India. Wow!

[2sleepy]

In case anyone is interested in the political influence of CCPOA

http://www.cjcj.org/cpp/flowchart/flowchart.htm

http://www.cjcj.org/cpp/political_power.php

http://www.1union1.com/guard_union.htm

http://www.lewrockwell.com/orig9/bacon1.html

[robinhood2]

Why haven't the Republicans in California sponsored a ballot measure to roll back the public employee pension formula to what it was in 1999? Retired public safety employees were NOT resorting to cat food to be able to afford a meal in those days. As I recall, when the 1999 pension bill was passed by the Democrat legislature, the Republicans were busy qualifying an anti-gay marriage ballot marriage, which passed the following year as Proposition 22. In 2008, the pension chickens have finally come home to roost, with Vallejo being the first city to file for bankruptcy protection. So what are the Republicans doing? Why, qualifying another anti-gay ballot measure for the ballot. Watch for it on the November ballot. When the City of San Diego eventually has to file for bankruptcy protection, maybe the politicians in Sacramento will finally wake up to the problem. In the meantime, both major political parties are not commenting on the pension issue.

[2sleepy]

About 80% of the politicians supported by CCPOA and other Public Safety unions are Republicans, they always find a politician who calls his or her self a 'law and order' candidate, they then define the 'agenda' to the politician, the candidate gets the $$$ and the fix is in. Don't count on those elected officials to sponsor a ballot measure that would in any way threaten these unions. .

[bdd]

"Filing for bankruptcy is and was unnecessary," Mustard said. "Yes, I believe they have a financial crisis, but I think they're turning their crisis into a catastrophe by going into bankruptcy."

Why can't they?
Big business does this several times over per day.
Let the chickens come home to roost.

And lets remember this is the republican economic model.
I repeat, lets remember this is the republican economic model.

[tinkaboutit]

This news tickles Repugnicans pink. Their true goal is to destroy government and make America a fascist ownership society. They achieve it by flushing our national treasure down the toilet on evil wars of dominion and massive tax cuts for their base-the haves and have-mores. Here is a sign of things to come courtesy of your Repugnican party.

[sandiegoconservative]

If you bothered to read the article, the blame points to the Unions.

Look at what happened in San Diego with their pension defecit, we are almost in the same boat. Our city council has majority of Democrats and one Republican who panders to unions because of who lives in his district,

It is not a Republican issue, genius.

[robinhood2]

Both political parties are to blame. The Democrats are guilty of getting into bed with the public employee unions. The Republicans are guilty of ignoring the issue and wasting their time with anti-gay marriage ballot measures.

[JScott]

Doesn't ANYONE remember that New York City used to be bankrupt?
Hey it's still here.

[GrainOSand]

An American municipality not able to pay its bills?

Why is this news when we have flag pins to be concerned about? Why is this compelling when we need to wonder about another American's patriotism under the guise of "the vetting process" that seems not to apply fairly and equally to other American's who happen to be running for President?

High fuel prices? No biggie!
War in Iraq? Shad Up, quit yer complaining, or shut your pie-hole!
War in Iran? We like sending our family to die for crooks, criminals, and charlatans who gain and maintain power through the tried and true method of conquer and divide!
Climate change? What's that?
1.5 million American children dropped out of high school? They now have more time to play Grand Theft Auto IV and the kids affected were not part of America's future anyway! Most of them were brown and we all know that America"s real agenda for these people is -- mass die off!
Job loss, broken health care system, political corruption and crime at the highest level -- all of that pales in the face of -- who does that Michelle Obama think she is?

Oh hypocrisy laden land of lies and lackluster behavior that does much to dull the shining beacon of hope premise -- this is your time to stand up and distance yourself from the despair of a history of malice and a morose forecast of a perilous future if we the people do not change.

[MetalCanuck]

ITs inflation that cause the economy to fall as result causing this. When people have to work for a diminishing dollar they have to demand more and more of them which will eventually finish a business or even a city. If we had solid money people would not be demanding as much because their standard of living would not be falling all the time from devaluation of savings and purchasing power. This would save most of the problem. If only people were awake, ignored the MSM and voted Ron Paul we would work to solve this problem for once.

[booker52]

I can see this happening around the country with the price of oil affecting everything. You can thank Bush and his war in Iraq for this. Shit rolls down hill. The housing bust was just the first. You have seen the price of food gone sky high. Soon you will see truckers not be able to move goods because of the price they have to pay for fuel. No lie. Alrlines charging for bags!! It's gone crazy.

[tinkaboutit]

crazy like a fox. the repugs WANT american government to collapse.

[vippy]

Do NOT blame it all on Republicans. Where are the DEMS on this. Did they not assist in
DEREGULATING? Now we see the fallout. Fire the politicians come re-election time, get rid of
them and send a message that lobbyists are only to bribe and don't represent the wish of the
people! Fire them and be serious about it.

[VOTER]

Bush Legacy.......... 21st Century GHOST TOWNS in America!

[workingboy]

On the money! I'm seeing them more and more, including where I live. Seeing something else. Almost overnight SUV's are disappearing, replaced by small amoeba shaped things. Was chatting with a car dealer. He said, lots of movement to these smaller cars. Then, like a seasoned bartender who's seen it all, he added that most had not paid off their SUV's, so this was just more to be adding to the pyramid of debt. I never see photos of Poppy and Barrr with their son. Are they attempting to dissociate THEIR legacy from HIS? Were they at the wedding?

Locally, three popular fast food restaurants have gone out of business; the hospital is firing about 50 due to falloff in their business; heard the booze shop is having massive sale due to bad business. ARE PEOPLE DRINKING GASOLINE??? We're not in a recession.

[Tator]

"caused by soaring employee costs and declining tax revenue."

Liberalism/government at its finest....hire to many people (to much government) and declining tax revenue (tax the crap out of people and business) abuse. So what do the tax creators do..they leave. What the story does not tell you is how many businesses have left town because of in their own words "sales tax, property tax and development fees."

You will see more of these and they well all be Liberal tax and spend cities. Happens every time.

[ohiomark]

I read several articles on this story and not one of them mentioned the political party of the Mayor or City Council.

That is code for......they are Democrats.

[Hirnlego]

Country is going bankrupt and there are two people to mostly blame: Reagan and Bush 43.

[heyjoe]

Wow, this hurts. I Have family in Vallejo and know the new Mayor personally. He is a VERY smart man. Hopefully he will correct the problem with which the the city has always suffered. That is, PRIMATIVE thinking from it's elected officials who have never had a progessive agenda for sustainable commercial growth. Former Mayor Douglas basically had a "no growth" idea for the city. She considered it a "bedroom" community where people come to live, but everything else had to be done outside the city. I think Mayor Davis will bring the city into the twenty first century and begin to attract commercial development that offers a tax base and draws people who will have places to both live and spend money enjoying the quality of their lives. GOOD LUCK! Valley will always be my first love. ALWAYS!!

[swift goat pet for truth]

At least American Homeownership is at an all time high.

[robinhood2]

My first post on this subject never made it through the gatekeepers at Huffington Post, but the second one did. Has anyone else had this problem?

[aigeanta]

Yes. The huffpo comment system is notoriously bad.

[faith]

I agree. That is why I rarely post on huffpo any more. Plus, the oversight is very poor. I have been banned, or omitted routinely without justification. I honestly think it is attributable to simple error. But, it does occur more frequently than is reasonable. So it goes...good luck with your postings.

[sparkey]

Wait for a day or so. You'll post a comment and see it on the story. When you come back to the story a few minutes later, it will be gone. Frustrating.

[robinhood2]

My original post finally made on to the system. Hopefully it will stay there for a few days.

[TheJibreelaMonsters]

E-40 for Mayor!

[aigeanta]

It's not just the Bush economy, it's crappy city planning, banking on revenue from property taxes from suburban sprawl instead of investing in communities that can generate business taxes.

[blytzd]

To be fair I'm sure demanding unions are at least part of the problem too.

[CaptainHowdy]

You obviously don't have a clue about economics.

Higher wages means MORE tax revenues. Higher corporate profits siphons off wealth from local communities.

The real culprit is corporate greed and inflation.