Local News

VALLEJO (CBS 5 / AP / BCN) ― Details were released Friday evening about a last-minute deal reached between Vallejo city leaders and labor unions that could allow this cash-strapped community to avoid becoming the first city in California to declare bankruptcy over a budget shortfall.

The two sides reached the tentative agreement to cut labor costs just before the City Council was set to vote Thursday night on whether to seek bankruptcy protection. Vallejo has grappled with spiraling employee expenses, a slowing economy and a rash of home foreclosures.

The City Council postponed the vote until Monday night so that council members and the public have time to study the agreement with the unions representing Vallejo's police officers and firefighters.

Mayor Osby Davis said the deal would balance the budget for its current fiscal year and "provide a framework for solving the long-term issues."

"It's not the answer to our financial problems," said Davis, who took office in December. "The problems we face are long-standing. They're not going to be solved overnight."

Kurt Henke, president of the International Association of Firefighters, Local 1186, said the deal was "a good start to getting Vallejo on a solid economic path. I think everyone's committed to doing everything we possibly can to avoid bankruptcy."

The city had faced a $9 million budget deficit for its fiscal year ending in June and was set to run out of money at the end of March, according to City Manager Joseph Tanner, who recommended the bankruptcy filing.

If bankruptcy were to occur, Vallejo would be the first California city to declare bankruptcy because its revenues can't cover expenses, experts said.

In 2001, Desert Hot Springs, a small town in Riverside County, filed for bankruptcy after it lost a lawsuit to a developer, while Orange County declared bankruptcy in 1994 after it lost money in a series of bad investments.

Vallejo, a mostly blue-collar city of 120,000 in Solano County, has been hit especially hard by the mortgage crisis and has one of the nation's highest foreclosure rates.

It is collecting less tax revenue than projected as retail sales and property values decline amid an economic downturn.

At the same time, Vallejo faced escalating costs for its police and firefighters, whose pay and benefits made up nearly 80 percent of its general fund budget.

Filing for bankruptcy protection would protect city officials from lawsuits and give them time to renegotiate contracts with employees, vendors and bondholders. But the move would lead to costly legal expenses and damage its credit rating and ability to sell municipal bonds.

Resident Angelica Gordon told a packed crowd inside the council chambers on Thursday night that Vallejo already suffers from an "image problem" and said filing for bankruptcy would be "taking the easy way out."

"Filing for bankruptcy will torpedo our image to the bottom of the ocean," Gordon said, adding that it would do nothing to attract businesses to Vallejo.

Another resident, Anthony Russo, drew applause when he said city leaders, including the council members, failed to hold city employees and their unions accountable for "still wanting more of the pie" even though they realized there wasn't enough to go around.

But perhaps the abundance of passion about Vallejo amidst the city's financial debacle was best summed up by resident J.D. Miller.

"I just want my city back," he said.

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