Vallejo Revenues Worsen

The Vallejo City Council agreed to cut another $2.2 million from its $79 million general fund budget this week, amid continued declines in revenues.

The San Francisco Bay Area city of 117,000 has been hit hard by the downturn in the housing market and declared bankruptcy May 23, launching the biggest Chapter 9 bankruptcy case since Orange County, Calif.’s 1994 filing.

The city slashed almost $10 million from its fiscal 2008-2009 budget as part of a bankruptcy pendency plan, but revenues have continued to decline since the budget was approved, while costs for the bankruptcy litigation have continued to rise.

The city finance department now projects a 7% drop in revenue this year, due to a $1.1 million shortfall in property tax collections, a $1.1 million decrease in sales taxes, a $481,000 drop in vehicle license fees, and a $474,000 shortfall in fee revenues, primarily due to decreased development fees. Bankruptcy legal fees are now expected to total $2.5 million this year, up from the $2 million budgeted in June.

“Despite years of budget cutbacks, the elimination of over 23% of the general fund workforce since FY 2003-04 and finally the protection of the bankruptcy court, we now must propose even further service reductions to rebalance operations with available revenues,” said city manager Joseph Tanner and finance director Robert Stout in a memo to the council this week.

They proposed closing the gap by leaving vacant fire and police positions unfilled, reducing overtime, furloughing non-sworn city workers for two days, deferring accrued leave payments owed to retirees, and transferring money to the general fund from Vallejo’s solid-waste fund and its repair and demolition fund.

The City Council gave preliminary approval to the cuts and will decide whether to finalize the moves at their Nov. 6 meeting.

Also this week, the city continued to battle with its public employee unions over its solvency. City workers fought the bankruptcy declaration in court this summer, but U.S. Bankruptcy Judge Michael McManus ruled last month that the city was insolvent and eligible for bankruptcy protection.

City workers won a rare victory in the case this week when the Ninth Circuit Bankruptcy Appellate Panel agreed to hear an appeal of McManus’ solvency ruling. The parties have until the end of the year to file their briefs in the appeal. In the meantime, the city will continue to fight to overturn union collective bargaining agreements.

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