Bankruptcy

UPDATE: Vallejo Strikes Deal to Avoid Bankruptcy

By J. Michael McBride

We last left off with the city council planning a meeting on Thursday to decide whether or not the city needed to file Chapter 9 bankruptcy. The financial turmoil that lowered the expected balance of the city's general fund account was caused by three different factors:

1. the mortgage crisis since Vallejo has one of the nation's highest foreclosure rates;
2. less tax revenue because of the retail sales and property values declining; and
3. police and firefighters pay and benefits that make up nearly 80% of the general fund budget.

With the general fund account balance lower than expected, the city was looking at insolvency by the end of March. The Thursday meeting to vote on the potential bankruptcy filing was postponed until Monday so the city leaders could review the tentative agreement reached with the union leaders of the firefighters and police departments.

Although the city will not divulge the details of the agreement reached until Friday afternoon, Mayor Davis said, the deal would balance their current fiscal year budget and "provide a framework for solving the long-term issues". The union president of International Association of Firefighters said the deal was "a good start to getting Vallejo on a solid economic path".

You can read the entire article at: http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2008/02/27/financial/f181306S66.DTL&type=printable

Chandra

Full post as published by Texas Lawyer Blog on February 29, 2008 (boomark / email).