Talk about a cautionary tale for those who believe that a municipal bankruptcy filing is the best-and-only hope for cities looking to get out of their fiscal messes. The Bay Area city filed for Chapter 9 protection in 2008, and there's been pushback ever since, much of it from retirees and unions. Finally, after many millions of dollars in legal fees, it seems as if settlement talks are drawing to a close. From the WSJ:
Under the plan, city employees will maintain their current pay and no additional jobs will be cut. But health-care benefits will be reduced for Vallejo's more than 400 city-worker retirees and surviving spouses, with the city contributing about $300 a month to premiums, down from about $1,500 for some retirees. Current pension payouts will remain in place.
Those public-safety workers whose pay and benefits make up more than 70% of the city's general-fund budget of about $65 million this fiscal year, took a big hit from the bankruptcy. The city scaled down its police force from a high of more than 150 officers to 90 today, and it closed three fire stations and cut the number of firefighters to 70 from more than 120. Funding for libraries, recreation centers and a convention center was also reduced.
Original bondholders have emerged from the reorganization unscathed, with the city having either repaid its debt or promising to continue repayment. That's good news for investors who hold bonds in other municipalities that are facing tough financial times - including L.A.