City files for bankruptcy

The city filed for bankruptcy protection Friday after administrators were unable to sufficiently trim a nearly $17-million shortfall.

The Bay Area city, with a population of about 120,000, had been bracing for the possibility since February as tax revenues fell and employee costs remained high. Eighty percent of the city's budget goes to police and firefighters, far above the norm for most California cities.

"I had hoped that even at the 11th hour and 59th minute we could come up with an alternative," Vallejo Mayor Osby Davis said.

It appears Vallejo negotiated contracts with employees that became too burdensome when the economy slowed down, said Juliet Musso, an associate professor of public policy and political science at USC.

The city of Desert Hot Springs in Riverside County filed for bankruptcy in 2001 after losing a lawsuit. Orange County declared insolvency in 1994 because of bad investments.

-- Jason Song

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