Vallejo to unveil deal to avoid bankruptcy

"We've got a tentative agreement, which is good," said Jon Riley, vice president of the International Assn. of Firefighters, Local 1186. "Nobody wanted bankruptcy."

City Manager Joseph Tanner had recommended that the council file for Chapter 9 bankruptcy, which would allow the city to renegotiate its debt, but also substantially reduce services for years to come.

For residents, the prospects are grim: Potholes left unfixed. Trees not trimmed. Longer waits for police to respond to calls.

"It's a black eye," said Ray Prather, manager of a downtown Army-Navy store.

"We worry that people won't want to come to Vallejo when they read about this," Prather said.

Civic leaders blame the city's current money woes -- a looming $9.2-million shortfall -- on a downturn in the housing market, flagging efforts to remake its waterfront and the high cost of providing public safety.

Police and firefighters account for 80% of Vallejo's budget, city officials say, due to soaring overtime bills and lucrative union contracts that have boosted base salaries, benefits and retirement plans. In most California cities, the average is about half the budget.

Vallejo's dance with insolvency is a historic exception among California cities, experts say.

"Certainly, bankruptcy is quite rare among municipalities," said Ken Kurtz, a managing director at Moody's Investors Service.

The largest and most infamous involved Orange County's 1994 bankruptcy after billion-dollar losses in the investment market, he said.

Desert Hot Springs also declared bankruptcy in recent years after a court judgment, and so have several small hospital districts, mostly in rural parts of California.

Before entering its current fiscal straits, Vallejo was for generations a hard-knuckle but fiscally stable city, home to the Mare Island Naval Shipyard, which provided jobs and tax revenue to the city.

But with the shipyard's closure in the mid-1990s, this city perched on the north shore of San Francisco Bay evolved into a bedroom community of 117,000.

Vallejo today is a tale of two cities, with struggling old shipyard neighborhoods west of Interstate 80 bumping against new subdivisions of commuters to the east.

On the west side, many residents see the prospect of bankruptcy as the inevitable end to what's been a long slide.

Jackie Kane, a mother of three children ages 9 to 13, waited at a taco truck for lunch, just past a sign on the outskirts of town that proclaims Vallejo the "City of Opportunity."

She said life hasn't been the same since the shipyard closed.

"When they lost Mare Island, it pretty much took the town away," said Kane, whose grandfather arrived in Vallejo with the Navy.