City of Vallejo files for bankruptcy
Is the California city an outlier or the canary in the coal mine? Vallejo, California filed for bankruptcy today as the first city put underwater by the foreclosure and housing crisis. With property values declining and folks lined up for reassesment of property taxes local governments who have lived like kings on bloated real estate tax revenues are going to see lots of red ink in the near future. Will Vallejo be the only or the first? I imagine that they’ll only be the first, with cities outside of 25 miles from the coast being the suspects to keep an eye on.
From the San Jose Mercury News on the Vallejo bankruptcy:
The city of Vallejo filed for bankruptcy protection Friday to deal with a ballooning budget deficit caused by soaring employee costs and declining tax revenue.The San Francisco Bay area suburb of about 120,000 residents became the largest California city to declare bankruptcy, which will protect the city from its creditors while it develops a plan to return to fiscal health.
Mayor Osby Davis said the city’s attorneys filed papers seeking Chapter 9 bankruptcy protection in federal court in Sacramento.
The foreclosure crisis and economic downturn have caused a sharp decline in revenue from sales tax, property tax and development fees.
Many officials and residents blame Vallejo’s chronic financial problems on labor contracts that they say provide overly generous pay and benefits to the city’s police officers and firefighters, which make up about three-quarters of the city’s general fund.