Vallejo, California declares bankruptcy

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Vallejo, California declares bankruptcy

Tuesday, December 2nd, 2008 | Economics |

Governing - Vallejo’s Fiscal Freefall:

Reasonable people can — and do — disagree about how Vallejo found itself in bankruptcy. There’s no doubt, however, that many of the city’s problems stem from its inability to recover from the 1996 closure of the Mare Island Naval Shipyard, once the city’s largest employer. The city also lost hundreds of thousands dollars per year in sales tax revenue after the closure of a Wal-Mart.

But the largest share of the blame in Vallejo has centered on public-safety salaries and benefits, which make up about 75 percent of the city’s general fund budget. Base pay for firefighters is more than $80,000 per year and employees can retire at age 50 with a pension equal to 90 percent of their salary, the result of a retroactive pension increase several years ago.

With the downturn in the housing market hammering revenues, Vallejo is asking the bankruptcy judge to void the collective-bargaining agreements that led to those salary and benefit arrangements. And the possibility of hard-fought union contracts going up in smoke has struck fear in the heart of labor groups

Previously:

- How irrational are California public pensions?
- State pension funds heading for insolvency
- How irrational were California real estate prices?
- California attempts to build world’s most *optimistic* commuter rail

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