VALLEJO – This cash-strapped city reached a tentative deal with its police and firefighters unions Thursday, just before city leaders convened to decide if the city would seek bankruptcy protection from a swell of economic uncertainty.
That question remains unresolved, however, as details of the deal will be made public today before the council revisits the issue Monday.
For now, Vallejo staves off the embarrassment of becoming the first sizable city in California's history to seek protection under Chapter 9, a rarely used provision of bankruptcy law that allows municipalities and other government entities to keep creditors at bay while trying to recover from economic hard times.
Officials had said the city would run out of money to pay its bills – and employees – by April.
The apparent deal would eliminate a $13.5 million budget deficit, said Mayor Osby Davis, who called the meeting into session about 30 minutes late, ostensibly because negotiators were talking until the last minute.
City officials had been negotiating with the unions to accept pay cuts and other concessions.
Both sides had been under pressure by angry residents, many of whom packed recent meetings after apparently being caught off-guard by the talk of bankruptcy.
"The unions have been cooperative," Davis said following Thursday's session, "but it's been tough."
The agreement "keeps us from filing bankruptcy … for now," said the mayor, who took his post just two months ago and was instantly plunged into one of the worst financial crises in this city's history.
"The problem I did expect," the mayor said. "The magnitude of the problem I did not expect."
The deal with the firefighters union gives the city much-needed breathing room. The mayor also hoped the extra few days will allow passions to cool, particularly among residents who have come out in droves to express concern about the city's fate, which for decades had been linked to Mare Island Naval Shipyard.
When the shipyard closed in the mid-1990s, Vallejo found itself scrambling to find a new economic engine to power its financial future. The city has struggled to redevelop the shipyard, and for the most part, has failed to attract significant new industry and business to help weather economic downturns.
The high cost of salaries and benefits for firefighters and police officers – amounting to 80 percent of the city's $80 million general fund expenditures – has added to the city's problems.
Other cities thus far have been able to weather the bad times, but Vallejo's miscalculations over the years conspired against it, said Michael Coleman, the fiscal policy adviser to the League of California Cities.
The bad economy has meant less revenue from sales taxes. In Vallejo, sales tax revenue in September was 6 percent less than in the same period the year before.
Moreover, the housing crisis hasn't boded well for property taxes. City officials are expecting $5 million less than expected.
The cost of running the city is more than what's coming in, but experts said Vallejo's problems extend deeper. Other cities are experiencing similar challenges as the economy sours – lower revenues, sinking consumer confidence and a real estate market that has many areas in upheaval.
"Some have problems more severe than Vallejo's," Coleman said. "You're not going to see most cities in this situation … because they've made sure they could manage volatility with adequate reserves."
Jon Riley, vice president of the city's firefighters union, said fire stations are being staffed by 43 fewer personnel since 2000. The city has 78 firefighters, he said.
To help reduce costs, the city is expected to cut 29 positions. It also plans to cut funding for libraries and the city museum and delay routine maintenance of streets, roadside lighting and other public facilities.
"It's not the people of this city who created this problem," said Sam Kurshan, a Vallejo resident who worries about the negative image of his city.
"Don't put a Band-Aid on this," he told the council. "It's a quick fix. … A lot of people think bankruptcy is inevitable to help break the cycle."
At least two council members shared similar sentiments after Thursday's City Council session.
"If it's not a long-term solution to this budget imbalance that we have," said Councilwoman Stephanie Gomes, "then I might not support it."
"Bankruptcy is a better solution than a short-term fix," she said, explaining that the financial gains of the proposed union deal would only postpone what some call inevitable. "We eliminated the deficit for this year, but come July 1, we'll have another $14 million deficit."
Call The Bee's Bobby Caina Calvan, (916) 321-1067.
