May 14, 2008

The City of Vallejo Declares Bankruptcy

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VALLEJO, CA – The City of Vallejo has become the first city of its size in California to seek bankruptcy protection.

The decision to file for bankruptcy came in a unanimous vote by the city council on May 6 as hundreds of residents watched, according to The Mercury News.

The dramatic vote came despite a last-minute appeal by state Sen. Pat Wiggins, D-Santa Rosa, and an aide for Assemblywoman Noreen Evans for the city to avoid bankruptcy.

Mayor Osby Davis said he had "turned over every rock he could find to find a solution" but none came and there is no longer an ability for the city to pay its debts.

Vallejo has been slammed by increasing costs of its public safety contracts, the housing crisis and lower property values.

The city faces a $16 million deficit in the 2008-09 fiscal year that starts July 1. The vote came after months of fruitless talks between city and labor representatives.

Chapter 9 bankruptcy will allow Vallejo to gain temporary protection from creditors and enable the city to continue to offer citizens necessary services.

The bankruptcy process will cost $750,000 to $2 million just in legal fees, city officials said.

Vallejo bankruptcy attorneys had recommended the city approve any bankruptcy filing at least a month before city coffers run dry, which could happen as early as June 30.

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