Vallejo Is Largest California City to File Bankruptcy

[marmar]

from Bloomberg:



Vallejo Is Largest California City to File Bankruptcy (Update2)

By Dawn McCarty and Michael B. Marois

May 23 (Bloomberg) -- Vallejo became the largest California city to seek bankruptcy protection a week after it rejected an offer by labor unions for $10 million in pay cuts.

The Northern California city listed assets of $500 million to $1 billion and debt of $100 million to $500 million in its Chapter 9 filing today in U.S. Bankruptcy Court in Sacramento. Bankruptcy protection would keep city services running and freeze creditor claims while officials devise a recovery plan.

``It's a bittersweet moment,'' City Councilwoman Stephanie Gomes said in a phone interview. ``It's bitter because our city is in such pain, but it's sweet because we are finally addressing our problems. We are finally addressing it head on.''

The filing came two weeks after the City Council's unanimous decision to file court papers seeking bankruptcy and talks with public safety labor unions failed to produce enough savings to keep the San Francisco suburb solvent. The bankruptcy makes Vallejo the first local government in the state to seek protection from creditors after running out of money amid the worst U.S. housing slump in 26 years.

``The purpose of Chapter 9 is to provide a financially distressed municipality protection from its creditors while it develops and negotiates a plan to pay its debts,'' Paul Glassman, a Los Angeles attorney who represented Irvine and four other cities during the Orange County, California, bankruptcy in 1994, said in a May 9 interview.

117,000 Population

Vallejo, with a population of 117,000, faces ballooning labor costs and declining housing-related tax revenue. The city expects a $16 million deficit for the fiscal year that starts July 1.

Police and firefighting salaries, pensions and overtime consume more than 70 percent of the city's $89 million general fund budget. That's higher than the 60 percent average throughout the state, according to the League of California Cities.

``I guess the battle goes into a courtroom now,'' said Kenneth Shoemaker, a city worker and member of the local International Brotherhood of Electrical Workers union. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=a5mErpbjjNXY&refer=home

[Hydra]

1. "Break the unions!"

:sarcasm:

Bushco drives us into a depression, and somehow it's the fault of the city workers...what a world.