Vallejo to vote on plan to avoid bankruptcy

March 3, 2008 11:39:57 PM PST
The Vallejo City Council is trying to find a way out of a deep financial hole. They're expected to vote anytime on a controversial cost-cutting plan which may still not be enough to avoid bankruptcy.

The city runs out of money in 30 days or less, so this may be their only opportunity at avoiding bankruptcy.

Despite Vallejo's shaky financial past, experts say the city of 120,000 is the canary in the coal mine -- a mortgage crisis indicator of what many other cities could be facing in the future.

Emotions flared at a council meeting Monday night after hearing the assistant city manager explain why Vallejo is on the verge of bankruptcy.

"In the past four years we have had seven acting, interim and regular city managers. We have had inconsistent fiscal discipline within our general fund," said Assistant City Manager Craig Whittom.

Monday night, the department heads recommended a fiscal emergency plan to stop the financial bleeding for four months so Vallejo can develop a long-term plan to solve its $9 million budget deficit.

"This four-month plan provides no room for error," said Susan Mayor, the city's finance director.

Council member Joanne Schivley says the plan depends on too many risky assumptions, like the transfer of $300,000 from the transportation fund to the general fund.

"With the price of oil going up to $103 a barrel, it seems very unlikely that there's going to be $300,000 in this fund to transfer to anything," said Schivley.

Schivley wants to tear up the existing employee contracts and negotiate all new ones. However, the fire and police unions are opposed. They already agreed to a 6.5 percent pay cut for four months in the proposed emergency plan and they say anything else could set off a legal battle.

"So basically what we're doing by agreeing to sit down with the city is to avoid millions of dollars in lawyers' fees," said Jon Riley with the Vallejo Firefighters Union.

Vallejo's department heads say this plan is the only way to buy time so the city can come up with a long-range solution and avoid bankruptcy. The city manager recommends it, but he's not giving it much of a prayer.

"I think there is probably a five percent chance that this will work," said City Manager Joseph Tanner.

The city council continued listening to public comments late into Monday night.

An insider tells ABC7 News that this will probably pass with possibly two dissenting votes, but it's the first of two votes. The next one takes place on Tuesday.