Should cities file for bankruptcy? Ask Vallejo

Even today, more than six months after the Northern California city emerged from Chapter 9 protection, it's not that pretty a picture. The police department is much smaller than it used to be (the city relies on 25 new video cameras to monitor areas that the cops can't regularly patrol), the unemployment rate still hovers around 12 percent, and more city budget cuts are in the offing. "People ask whether it was worth it," Vallejo Mayor Osby Davis tells the Sacramento Bee. "That question suggests we had an option. It was filing bankruptcy or not existing as a city any more." The economic climate is improving, but it's slow.

Davis, a probate lawyer and longtime Solano County supervisor, was elected mayor in 2007 and re-elected last year. He said Vallejo took far too long to own up to the fact it was in grave financial shape. A 1990 study had warned Vallejo would go bankrupt in 2010 if it didn't rein in employee costs, spiraling retiree pensions and health care expenses. But not long afterward, the city was consumed with more immediate concerns. The Mare Island Naval Shipyard, the city's economic lifeline of 140 years, closed in 1993. The city scrambled for years to attract new companies, a medical school and 1,900 jobs to the property. Then came the housing meltdown - and the plummeting property tax revenues that brought the city face to face with its long-predicted budget bust. "Going into bankruptcy put a stigma on the city," Davis said. "It demoralized our employees. It demoralized our citizens. It takes its toll."