Fallout: City of Vallejo teeters near bankruptcy

The northern California city of Vallejo is dangerously close to bankruptcy tonight, an event that would punctuate the decline of the state's housing market and the sudden reversal of financial fortune for California's state and local governments.

Bloomberg reports: "Vallejo, a city of 135,000 outside of San Francisco, moved closer to bankruptcy after negotiations with its labor unions collapsed. Bondholders will likely be asked to sacrifice some of their investment if the city seeks bankruptcy protection, an attorney for the municipality said last night. Vallejo faces ballooning labor costs and declining housing-related sales-tax revenue, leaving budget officials projecting that money will run out within weeks."

More: "Municipalities throughout California are grappling with billions of dollars in labor and pension cost increases incurred during the late 1990s. The crisis comes as the worst housing slump in the U.S. in 26 years saps tax revenue. The state's own $16 billion deficit led Governor Arnold Schwarzenegger last month to declare a fiscal emergency."

The Mercury News: "As Vallejo geared up for Thursday night's showdown on the city's fiscal crisis, the mayor, staff and public safety unions held 11th hour negotiations Wednesday to fashion a deal to stave off bankruptcy.   Both sides were also set to meet Thursday morning, hours before the City Council is scheduled to make an unprecedented vote on whether to seek bankruptcy protection."

Thoughts? Comments? Email story tips to peter.viles@latimes.com
Hat tip: Better Village

Comments

[adoptivefather]

The public employee pension/health bomb is about to go off. Scummy politicians bought public employee votes with promises that could never be met long term.

First strategy is to try raping the taxpayers,but that will fall short. Next huge cuts in services crashing quality of life and further accelerate the downturn. Finally there will be no option but benefit cuts and/or bankruptcies all across California.

Very sad situation with misery everywhere. Don't rule out lots of violence as things deteriorate. Have an escape plan ready.

But I did save $75 on my car insurance!!

[RichW]

"Municipalities throughout California are grappling with billions of dollars in labor and pension cost increases incurred during the late 1990s"

...And when did the citizens approve these increases ? Just imagine if we could actually vote on these sort of things. I bet the corrupt unions and their paid-off politicians would be a thing of the past, not to mention our taxes wouldn't keep increasing at an unreasonable rate.

[Rob]

Throw a bunch of those new Marijuana Vending machines in the downtown area, all the stoners from SF, and there are a lot, can fund the recovery...

[toby]

It's either Enron or the real estate market....

It's never the politicians themselves who are to blame for the budget problem.

[pathetic]

Prop 13 and unions did a great job on Vallejo. The commu-socialism that the populous has either embraced or let go unimpeded is not coming back to bite everyone in the a$$.

[j coats]

In 1968 during the Zodiac killings & race riots, Vallejo police went on strike. And in fact did not show up for work for almost 3 weeks. They then negotiated ( the police) a union contract (wich is the equivalent of a strangle hold) and never let go!