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www.ci.vallejo.ca.us
Vallejo On Brink Of Bankruptcy
POSTED: 1:09 pm PST February 19, 2008
UPDATED: 3:49 pm PST February 19, 2008
VALLEJO, Calif. --
by John Boitnott, Web Producer
The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.
Vallejo may run out of cash as early as March, council member Stephanie Gomes said.
"Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."
Gomes said the situation has been building for more than a decade.
"This has been happening for quite a while. For 15 years the city council has been putting Band-Aids on the problem. (It has been) extending contracts and deferring payments for public safety to the next years as a way of balancing the current budget."
Public safety contracts for police and fire services make up 80 percent of the city's general fund.
"We've been spending more than we've been making for 20 years and it's time to pay the piper," Gomes said.
Newly elected Mayor Osby Davis is downplaying the possibility, NBC11's Jodi Hernandez reported.
"I like to look on the positive side," Davis said. "I'm confident we're going to be able to work this out without having to file bankruptcy. It's not an alternative we want the public to believe we're moving toward with any intention."
Council members Joanne Schivley and Gomes have announced they will host a community town hall meeting this Thursday to discuss bankruptcy.
The meeting will be held at 7 p.m. at 733 Tennessee Street between Napa and El Dorado.
The City Council will meet in closed session Feb. 26 with the city's employees' organizations to try to find a solution to the budget crisis.
In a report to the City Council dated Feb. 13, Vallejo Finance Director Rob Stout projected that without deep cuts, including assumed agreements negotiated with police and fire departments by June 30, the City will be $6 million in debt and will have spent every last penny of its $4 million in reserves.
Gomes said the city has a plan to cut $20 million out of the budget in the next year.
That emergency spending plan could devastate city services. The police and fire unions must agree on the spending cuts before it can be considered.
The Feb. 26 city council meeting takes place the same day the City Council plans to vote on the plan.
In a report to the City Council last week, City Manager Joseph Tanner said the city faces a $10.1 million general fund operating deficit for the current fiscal year and a negative available fund balance of $5.9 million on June 30, 2008.
"Based upon the updated financial projections, the current estimate for insolvency is late April 2008," Tanner said. "It may become necessary for staff to recommend that the City Council consider filing and pursuing Chapter 9 bankruptcy in the event the city is unable to meet its existing obligations with its existing revenues," Tanner said in the report.
The city currently has a $135 million liability for the present value of retiree benefits already earned by active and retired employees and an additional $6 million a year as employees continue to vest and earn this future benefit, Tanner said.
Gomes said she and Schivley wanted the meeting to be held Tuesday night at City Hall but one of the council members pulled the item from the agenda.
"We felt it was important to do it anyway so the public could hear and have a discourse on the budget," Gomes said.
Emergency Plan Would Hit Hard
The plan calls for cutting city salaries to 5 percent lower than June 30, 2007 starting on March 28. Police and firefighter salaries under the existing labor agreements would be reduced 15 percent, by 8 percent for the electrical workers and 5 percent for confidential, management and un-represented employees.
Thirty general fund positions would be eliminated, 16 of which are currently filled and will require layoffs. Other vacant positions could be filled by transferring employees but the reductions would reduce the general fund positions from 494 to 411, or by 17 percent.
A single fire engine company would be closed each day on a rotating basis and there would be a three-month temporary reduction in truck company staffing from four to three.
"No California municipality has filed Chapter 9 bankruptcy, and there is very little case law guiding the potential outcome of such a filing. The risks of this option are significant," Tanner said.
Some city officials, including Mayor Osby Davis, however, are hopeful a resolution can be reached and bankruptcy can be avoided.
Orange County went bankrupt in 1994. That was a one-time problem, Gomes said.
"They had issues related to some bad investments," Gomes said. "They just restructured their debt and figured out how to pay it. For use it's not as much a debt problem. It's more of a structural problem."
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www.ci.vallejo.ca.us
Vallejo On Brink Of Bankruptcy
POSTED: 1:09 pm PST February 19, 2008
UPDATED: 3:49 pm PST February 19, 2008
VALLEJO, Calif. --
by John Boitnott, Web Producer
The city of Vallejo is on the brink of becoming the first California city ever to declare bankruptcy, City Council members said Tuesday.
Vallejo may run out of cash as early as March, council member Stephanie Gomes said.
"Not only that, but now we have 20 police and fire employees retiring because they are afraid of not getting their payouts," Gomes said. "That means we have another few million dollars in payouts that we had not expected. So the situation is quite dire."
Gomes said the situation has been building for more than a decade.
"This has been happening for quite a while. For 15 years the city council has been putting Band-Aids on the problem. (It has been) extending contracts and deferring payments for public safety to the next years as a way of balancing the current budget."
Public safety contracts for police and fire services make up 80 percent of the city's general fund.
"We've been spending more than we've been making for 20 years and it's time to pay the piper," Gomes said.
Newly elected Mayor Osby Davis is downplaying the possibility, NBC11's Jodi Hernandez reported.
"I like to look on the positive side," Davis said. "I'm confident we're going to be able to work this out without having to file bankruptcy. It's not an alternative we want the public to believe we're moving toward with any intention."
Council members Joanne Schivley and Gomes have announced they will host a community town hall meeting this Thursday to discuss bankruptcy.
The meeting will be held at 7 p.m. at 733 Tennessee Street between Napa and El Dorado.
The City Council will meet in closed session Feb. 26 with the city's employees' organizations to try to find a solution to the budget crisis.
In a report to the City Council dated Feb. 13, Vallejo Finance Director Rob Stout projected that without deep cuts, including assumed agreements negotiated with police and fire departments by June 30, the City will be $6 million in debt and will have spent every last penny of its $4 million in reserves.
Gomes said the city has a plan to cut $20 million out of the budget in the next year.
That emergency spending plan could devastate city services. The police and fire unions must agree on the spending cuts before it can be considered.
The Feb. 26 city council meeting takes place the same day the City Council plans to vote on the plan.
In a report to the City Council last week, City Manager Joseph Tanner said the city faces a $10.1 million general fund operating deficit for the current fiscal year and a negative available fund balance of $5.9 million on June 30, 2008.
"Based upon the updated financial projections, the current estimate for insolvency is late April 2008," Tanner said. "It may become necessary for staff to recommend that the City Council consider filing and pursuing Chapter 9 bankruptcy in the event the city is unable to meet its existing obligations with its existing revenues," Tanner said in the report.
The city currently has a $135 million liability for the present value of retiree benefits already earned by active and retired employees and an additional $6 million a year as employees continue to vest and earn this future benefit, Tanner said.
Gomes said she and Schivley wanted the meeting to be held Tuesday night at City Hall but one of the council members pulled the item from the agenda.
"We felt it was important to do it anyway so the public could hear and have a discourse on the budget," Gomes said.
Emergency Plan Would Hit Hard
The plan calls for cutting city salaries to 5 percent lower than June 30, 2007 starting on March 28. Police and firefighter salaries under the existing labor agreements would be reduced 15 percent, by 8 percent for the electrical workers and 5 percent for confidential, management and un-represented employees.
Thirty general fund positions would be eliminated, 16 of which are currently filled and will require layoffs. Other vacant positions could be filled by transferring employees but the reductions would reduce the general fund positions from 494 to 411, or by 17 percent.
A single fire engine company would be closed each day on a rotating basis and there would be a three-month temporary reduction in truck company staffing from four to three.
"No California municipality has filed Chapter 9 bankruptcy, and there is very little case law guiding the potential outcome of such a filing. The risks of this option are significant," Tanner said.
Some city officials, including Mayor Osby Davis, however, are hopeful a resolution can be reached and bankruptcy can be avoided.
Orange County went bankrupt in 1994. That was a one-time problem, Gomes said.
"They had issues related to some bad investments," Gomes said. "They just restructured their debt and figured out how to pay it. For use it's not as much a debt problem. It's more of a structural problem."
-Sapiens
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