In late February we discussed the city of Vallejo in California that was contemplating on filing Chapter 9 Bankruptcy. Tuesday night the City Council unanimously agreed to the bankruptcy filing after the two-month long mediation sessions with unions failed to balance the fiscal plan long-term. The city public information officer, JoAnn West, stated, “[t]here’s an issue of timeliness here. We need to get into bankruptcy court as quickly as possible before we run out of money”. The city had initially predicted it would run out of money from it’s general fund for expenses by the end of March.

Mayor Osby Davis warned the residents they would “be asked to approve tax increases and other revenue enhancements”. If you remember, the city public safety workers received 15% raises in 2006, which some of the residents believed contributed to the city’s impending insolvency. On July 1, those safety workers (police and firefighters) are scheduled to receive 5.5 percent raises while the other city employee groups are expecting a 3 percent raise.

Employee wages are to be frozen at current levels, and rollbacks that the unions agreed to in March of 6 percent could be restored. Currently, according to the city financial report, the salary and benefits are:

police captain earns $306,583;
police lieutenant gets $240,146;
fire caption earns $206,890; and
firefighters earn an average of $171,250.

State senators Pat Wiggins and Noreen Evans stated they would try to help the city with grants, and sale tax money. Bankruptcy attorneys predict that other cities hit hard by the mortgage crisis will be watching as Vallejo moves into bankruptcy. Senator Evans is worried that other cities my try and “follow suit” stating Vallejo has “made it easier for other cities to do the same thing.” Bankruptcy expert Sajan George is hopeful that “Vallejo will emerge on a sound and solid financial footing” with time to rework expensive labor contracts and a budget that will work for the city.

You can read the entire article at: http://www.thereporter.com/ci_9192460?source=rss

Chandra