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Vallejo Declares Bankruptcy

by: Robert Cruickshank

Wed May 07, 2008 at 07:50:24 AM PDT

After months of wrangling and negotiating the city of Vallejo has voted to declare bankruptcy. And to hear the local media tell it, like the San Francisco Chronicle, it is the fault of public workers, not poor political leadership:

After about four hours of discussion and public comment from the standing-room-only crowd, the council voted 7-0 to approve Tanner's recommendation to declare Chapter 9 bankruptcy protection as a means to reorganize its finances, which have been shattered by spiraling public employee salaries and the plummeting housing market....

The city and its public safety unions have been at the bargaining table for about two years. The city is asking for its police and firefighters to take salary, benefit and staff cuts, while the unions say any further cuts would endanger public safety as well as the safety of the police and firefighters.

Vallejo spends 74 percent of its $80 million general fund budget on public safety salaries, significantly higher than the state average. The generous contracts are the result of deals struck in the 1970s, following a police strike that left the city in turmoil.

What is not said here, or anywhere in the article, is the reason for that public safety spending. Vallejo's police and fire services are understaffed - as are many agencies in California, in a little-known but extremely important and widespread phenomenon. City leaders have been loath to hire new workers, but they have also needed the public safety services - so the workers that are on the payroll have been working overtime. And overtime pay is usually always higher than regular pay.

Vallejo, like many California cities, wanted to maintain a high services and low tax environment, and has found this is not possible, especially when an artificially-created bubble bursts. Instead of accepting responsibility and seeking new revenues to balance the city's books without endangering the public, city leaders chose to blame the public workers for the problems and declare bankruptcy instead of avoiding the underlying issues.

To be fair, Vallejo is not in complete control of its own destiny. Decades of state and federal budget cuts, made to pay for tax cuts for the wealthy, have had a trickle-down effect of eviscerating services and leaving cities more and more financially exposed as state and federal aid has begun to dry up. It's not exactly as if Bush and Arnold have directly told Vallejo to drop dead but through their inaction in the face of widening government financial crisis, they have achieved the same result.

Vallejo IS the tip of the iceberg, as many cities face similar problems. Some have done the right thing and sought new revenues, like Salinas, and avoided destructive service cuts. Others are following Vallejo down the path of blaming public workers. Without state and federal solutions, this scene may well replay itself again and again across the state in the coming years.

Robert Cruickshank :: Vallejo Declares Bankruptcy
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Few options (0.00 / 0)
Vallejo has few options on the revenues side. Unfortunately, there is still a supermajority and a vote requirement for revenue increases.  While that might be possible, they have but a few choices on that front, some sort of parcel tax or a sales tax increase. Neither of which could really be accomplished before they were out of cash.

I'd like this to be framed better than "stupid locals gave too much money to their cops." Obviously that is a gross exaggeration and oversimplification. Sure, Vallejo probably should have increased the sales tax (in Vallejo it is only 7.375%), but there's just not that much room to grow. And, the sales tax is regressive anyway.

That being said, it is clear the two largest culprits are not from Vallejo. In fact, one of them is dead (Howard Jarvis), the other is an aging action hero.

Cities and counties are getting scapegoated for cutting services, but this is the only logical conclusion of what the state has done to the locals.

I think?

Overtime costs (0.00 / 0)
Analysis will show that the cost of a public safety employee on overtime is about the same as an employee on regular time.  The cost of things like benefits and retirement are based on the normal work week, usually close to 50% of salary.  When overtime is worked, it is only the salary which is involved.  Time and a half equals about straight time plus benefits and amenities.

In Vallejo's case, they pay about 75% of total budget to public safety, where in most cities, it is more like between 60-70%.  SFGate has lists of various cities and other agencies salaries, including Vallejo.  Somewhere along the way, Vallejo lost control of their financial situation and their only way to try to regain it is by drastic actions.

The real problem is that since 1978, we have not figured out how to fund government at any level appropriately.  The only levels of government which are not in some kind of crisis are special districts (water, sewer, hospital, etc.) which can levy fees for service.  

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