Vallejo has struggled to negotiate pension and wage concessions from police, firefighters and city employees since it fell into bankruptcy in 2008.
By the time it resorted to filing for Chapter 9 bankruptcy protection it had eaten through most of its general fund reserves and had stopped funding for many community organizations and found itself patching wornout police cars, according to court papers.
The city was $10 million in the hole and borrowing money just for payroll, according to court papers.
U.S. Bankruptcy Judge Michael S. McManus agreed to put is stamp of approval on the Vallejo plan after lawyers work out final terms with Union Bank, the primary creditor.
Vallejo asked for bankruptcy protection in May 2008 at the outset of the recession, as the mortgage crisis eroded the tax base of the San Francisco suburb. The former Navy town of 120,000 struggled to cut costs and renegotiate terms with city unions, wchi initially rejected wage cuts.
“The next five years will not be pleasant or easy for the city, as the economy remains slow and the city’s budget is exceedingly lean,” wrote Marc A. Levinson, attorney for the city, with Orrick, Herrington & Sutcliffe in San Francisco.
Case: In re: City of Vallejo, Calif., No. 08-26813 (Eastern Dist. Calif. Bankruptcy)