Vallejo’s creditors face a deadline today to object to the San Francisco Bay-area city’s bankruptcy filing.
As of yesterday morning, the city’s bankruptcy Web site listed just one objection filing: a handwritten note from Herb S. Shrum, a retired police officer. He said the loss of health insurance or pension benefits would hurt his quality of life.
Employee unions, which have hired outside accountants to study the city’s finances and pledged to contest the filing, have until today to file their objections. They say the city has not done all it could to raise revenues and cut expenses.
Vallejo filed for protection from creditors under Chapter 9 of the bankruptcy code last month, making it the largest municipality to declare bankruptcy since Orange County, Calif., in 1994. The city wants to escape labor agreements that its elected officials and city manager say the working-class community cannot afford.
The City Council this week passed a budget for fiscal 2008-2009 that implements a pendency plan submitted to the court earlier this month. The budget cuts $7 million of spending from the general fund, violates labor contracts by holding salaries constant, cuts almost all discretionary spending for community-based organizations, and continues to make debt service payments with a 6% cap on the interest rate the city is willing to pay.
U.S. District Bankruptcy District Court Judge Michael McManus blocked out time on his calendar to hear objections today. If he accepts Vallejo’s contention that it is bankrupt, the next step in the bankruptcy process is hearings on the city’s motion to reject its labor contracts. McManus has scheduled a hearing on that issue for July 23.