By Sarah Rohrs
San Jose Mercury
Copyright 2008 San Jose Mercury
VALLEJO, Calif. — With hundreds of concerned residents looking on, the Vallejo City Council voted unanimously late Tuesday to file for bankruptcy, making the city the first of its size to seek protection because of unaffordable labor contracts.
The dramatic vote came despite a last-minute appeal by state Sen. Pat Wiggins, D-Santa Rosa, and an aide for Assemblywoman Noreen Evans for the city to avoid bankruptcy.
Four council members - Michael Wilson, Tom Bartee, Hermie Sunga and Erin Hannigan - joined Mayor Osby Davis in switching in favor of filing for bankruptcy. In the past they had been part of a 5 to 2 majority seeking to avoid taking that historic action.
Davis indicated before the vote that he had spoken to both Wiggins and Evans about the probable vote, and received assurances they would try to get help for the city from Sacramento.
Davis said that he had “turned over every rock he could find to find a solution” but none came and there is no longer an ability for the city to pay its debts.
Councilwoman Joanne Schivley, who had supported bankruptcy two months ago, called for unity, and said the council and residents need to work together. Councilwoman Stephanie Gomes completed the seven-member roll call.
Vallejo has been slammed by increasing costs of its public safety contracts, the housing crisis, lower property values and state raids on local coffers.
The city faces a $16 million deficit in the 2008-09 fiscal year which starts July 1. Tuesday night’s dramatic vote came after months of fruitless talks between city and labor representatives.
After those talks, which continued through the weekend and failed to produce a long-range fiscal plan, Vallejo’s top administrators recommended bankruptcy as the only option remaining.
Chapter 9 bankruptcy will allow the city to gain temporary protection from creditors and enable the city to continue to offer citizens necessary services.
The bankruptcy process would cost $750,000 to $2 million just in legal fees, city officials said.
Those supporting the bankruptcy option say the city has no recourse left but to rework expensive labor contracts and forge a budget Vallejo can afford.
Many others said the city should do all it can to avoid filing for bankruptcy to avoid hurting Vallejo’s credit rating, image and ability to attract businesses.
City leaders say the city is quickly running out of money.
Just hours before it was to take the historic vote, the seven-member City Council met behind closed doors to discuss the latest developments on labor negotiations.
Vallejo bankruptcy attorneys have recommended the city approve any bankruptcy filing at least a month before city coffers run dry, which could happen as early as June 30.
The council also met privately Monday night to talk about the mediator-led negotiations, a day after parties met in a last-ditch weekend effort. Those sessions, held over the past two months with independent mediator John Kagel, have not been fruitful.
City employee union attorney Alan Davis has said a union-hired financial expert has produced two documents contradicting the city’s assertions of an enormous deficit.
Davis vowed to release the documents if an agreement was not reached. However, the unions have been unwilling to produce the reports for public review.
On April 22, Councilwomen Stephanie Gomes and Joanne Schivley said a last-minute union proposal should have been made public.
Both Gomes and Schivley voted against the March 3 labor pact, saying it did not go far enough to reduce the union contracts’ effect on the general fund.
The city has sought concessions from public safety unions and from International Brotherhood of Electrical Workers union members to slash contract costs and come up with a plan to balance the budget through 2012.