California City Moves Closer to Bankruptcy Filing

[Ichingcarpenter]

Feb. 27 (Bloomberg) -- 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.

The city council is scheduled to consider a resolution tomorrow to file for Chapter 9 bankruptcy protection, after negotiations with labor unions to win salary concessions broke down Monday. If approved, Vallejo would become the biggest city and second-largest local government in the state after Orange County to file for bankruptcy.

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.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajxCNoS2DEzE

This is gonna be a growing trend.

[Hydra]

1. Yup

No money, no revenue, no jobs, no nation...

Oh, wait. They can just declare martial law when it gets bad enough.

[MaryCeleste]

2. Minor Note: Its Vallejo, not California City (yes there is a town named California CIty)

[Ichingcarpenter]

3. Vallejo is a California City

thanks for your geographic lesson on an economic problem

[MaryCeleste]

4. The title is misleading, its makes it sound like California CIty is in bankrupcy

a more correct title would have been:

Vallejo...

or

A California city...

I do realize that it was the Bloomberg title, and not yours...

[SoCalDem]

5. That's the American way.. Steal money every week..for YEARS

from employees' checks, in exchange for promises of a pension.. and then spend it all..and then just declare insolvency and hang them all out to dry..

It works for the auto industry, the airline industry,... why not municipalities..:grr:

[MaryCeleste]

6. As a taxing agency, the city will not be allowed to do massive restructure

it will raise rates and taxes instead.