Before the bankruptcy in 2008, Vallejo did what a lot of cities did. It allowed employees to accrue sick leave and vacation time with the promise that it could be cashed in at retirement -- bankruptcy has changed that.
At Vallejo City Hall Thursday morning, City Manager Phil Batchelor announced the city has reached a milestone.
"We have stabilized the city to the point where we do not anticipate any further reductions," said Batchelor.
In two and a half years since the city declared bankruptcy, the police force has been reduced from 155 officers to 90, 60 percent of the homeowners are underwater on their mortgages, three fire stations closed, and road repairs have been postponed.
"We've reached a point where everybody is concerned, 'What is next? What's coming?'" said Batchelor.
Batchelor admits employee morale is pretty low, but there will be no more layoffs. Instead, the city is proposing to deny millions of dollars in claims made by current and retired employees.
"So for the ordinary city workers, they've said that they may receive between five and 20 cents on the dollar for all of the lost wages and lost benefits they've suffered from the bankruptcy," said Dean Gloster, an attorney for Vallejo's largest employee union.
Gloster will argue with the bankruptcy judge to reject that proposal, but the IBEW Local 2376 union president Frank Caballero says he thinks the city's playing straight with its workers.
"Yes, I would say so...yes. I'd have no doubt really, in their financial situation, yes," said Caballero.
At the Vallejo fire department, Bill Tweedy tells ABC7 he's been with the department for 27 years and has built up 3,000 hours of unused sick leave.
"If you promise somebody something in the end, that's what you should be given them after either 20 or 30 or 35 years of service. You should give them what you said you were going to give them," says Tweedy.
The city manager says it's just not possible.
"Would we decrease fire, close another fire station, would we take more police off the streets?" asked Batchelor.
The deal from the city will have to go before a bankruptcy judge for approval and that could take months.
This was the second largest municipal bankruptcy in California's history.