Tapped out in Vallejo

VALLEJO – The USS Guitarro was christened at Mare Island in 1969. It sank soon after. Tongues wagged near and far, and accusatory fingers pointed all around.

As this city sinks further into financial turmoil, the blame game is again playing out as city leaders attempt to steer the town from financial ruin. With few options, city officials may be looking for safe harbor tonight as they consider filing for bankruptcy protection.

Now awash in red, this blue-collar town has had a colorful history. For a brief moment, in 1852-53, it was California's capital. In the 1930s, the Chicago gangster "Baby Face" Nelson escaped the feds by hiding out in a Vallejo hospital. The "Zodiac Killer," who terrified the Bay Area in the late '60s and whose identity remains a mystery, was thought to be from Vallejo.

But not since closure of the Mare Island Naval Shipyard, and the sinking of the Guitarro, a nuclear-powered attack submarine, has there been so much consternation.

The former Navy town could soon run out of money to pay its bills. It could become insolvent by April.

Negotiations with its fire and police unions have faltered. And tonight, the city could enter uncharted territory by becoming the first sizable city in California to file for Chapter 9, a rarely used protection for governmental jurisdictions facing tough times.

Unlike personal and commercial bankruptcies, the city cannot liquidate its assets. The filing would allow the city time to find a way to pay its bills, including perhaps raising taxes, and more time to negotiate with its unions.

The city manager recommends the move. Some on the City Council are already on board. Angry residents demand answers.

"We have more money coming out than coming in. There's no question about that," Mayor Osby Davis told an overflow crowd at Tuesday's council meeting.

"I happen to believe that the members of this council have this city's best interest at heart," Davis said.

Vallejo has gone through some tough times, said Lou Burgelin, 92. He was born here, worked most his life at the Navy shipyard and knows the city from its early days of downtown pubs and brothels.

The bankrupcty talk doesn't really interest Burgelin. He'd rather talk about shipbuilding, as he does now and then with the city's new mayor.

Folks should have seen it coming, said Burgelin.

"This is just a bump in the road," he said. "I think they'll straighten things out. In fact, I expect them to."

How soon things can be straightened out is unclear and, to a large extent, hinges on matters beyond the city's control.

The downturn in the housing market has meant a decline in property taxes. The soured economy doesn't help revenues from sales taxes.

City officials have been negotiating with police and fire unions to get them to agree to cuts in pay – or face layoffs – to reduce a $13.8 million budget shortfall.

The city spends 80 percent of its $80 million general fund on public safety. Most cities spend no more than 60 percent of their unrestricted cash for police and fire services.

The city is also looking to eliminate at least 30 jobs and cut funding for county-run libraries. Residents are being asked to use non-emergency city lines for certain phone calls.

Through its struggles, Vallejo has never been a place to say, "Woe is me," said James Kern, executive director of the Vallejo Naval & Historical Museum, housed in Old City Hall.

For 145 years, ships floated Vallejo's economy.

"The shipyard itself was the city for 145 years, until the Navy closed the shipyard in 1995," he said. "The shipyard and the city were pretty much tied together. Throughout its history, Vallejo always went up and down."

The booms came in waves along with the two World Wars, then Korea and Vietnam.

"This was a real Navy town. When the ships came in, the crews came over to Vallejo for R&R," he said. "For some time, there were lots of places for them to drink, there were brothels in one part of the downtown where no respectable people would go."

The downtown has suffered mightily over the years, despite continued efforts to revive it. Much of the city's new economy has centered east of Interstate 80, where the city has extended its sprawl of homes, strip malls and big-box stores.

"For better or worse, Vallejo has definitely changed," said Kern. "It's definitely not a Navy town anymore."

The city has certainly had its opportunities. It lost out on a huge mall that eventually moved to Fairfield when the city could not help secure a land deal. It also lost out on huge, sales-tax generating car lots.

The shipyard itself, with many of its historic buildings still intact, was to be an economic engine. It is home to a small university. New homes have been built. Industry has moved into some old warehouses. But the shipyard's potential has yet to be realized.

In 2006, Vallejo hired a new city manager, Joe Tanner, a former city manager of Galt who was later credited with revitalizing downtown Pleasant Hill and steering Emeryville from bankruptcy.

By most accounts, Tanner's work in Vallejo is a tall order.

The shipyard, which at its peak during World War II employed more than 40,000, had always been the city's economic engine.

Those days are long gone, reminds Burgelin, who helped found the city museum.

"You have to know how it got to where it is," Burgelin said.

Some people liken the city to a sinking ship, though Burgelin, who worked most his life at the Mare Island shipyard, would rather call it a train wreck.

"The Guitarro was a real sad situation," Burgelin said wistfully. "The one Vallejo is in now has been coming for 20 years. The city's councils and managers should have seen it a long time ago, but nobody until now decided to step in."

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• Call The Bee's Bobby Caina Calvan, (916) 321-1067.