Bankrupt City Could Serve As Model

The northern California city of Vallejo has declared bankruptcy, becoming one of few cities and the largest in the state to do so. Other struggling cities are watching closely to see if the strategy helps to save the city.

1 minute read

May 13, 2008, 9:00 AM PDT

By Nate Berg


"There's a wave of this coming across the U.S.," said Sajan George, an adviser to struggling public entities who worked on restructuring Orange County after it declared bankruptcy in 1994. "What happens in Vallejo could definitely set a precedent."

Battered by the plummeting housing market and skyrocketing public employee contracts, Vallejo made dubious history Tuesday night by becoming the largest California city to declare bankruptcy. The North Bay city of 117,000 was on track to start the fiscal year July 1 with a $16 million deficit and no money in reserve.

By declaring Chapter 9 bankruptcy, the city hopes to freeze its debts and gain time to renegotiate its police and fire contracts, which comprise about 74 percent of its $80 million general fund budget. It also hopes a judge will void part or all of the contracts, allowing the city and unions to start from scratch.

Because so few public entities have declared bankruptcy, no one's sure how labor contracts will be affected. Vallejo's public safety unions have vowed to fight the proceedings, arguing that the city has plenty of money stashed in hidden accounts and is using bankruptcy to avoid paying police and fire fighters what they're owed.

Sunday, May 11, 2008 in The San Francisco Chronicle

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Cover CM Credits, Earn Certificates, Push Your Career Forward

Aerial view of town of Wailuku in Maui, Hawaii with mountains in background against cloudy sunset sky.

Maui's Vacation Rental Debate Turns Ugly

Verbal attacks, misinformation campaigns and fistfights plague a high-stakes debate to convert thousands of vacation rentals into long-term housing.

July 1, 2025 - Honolulu Civil Beat

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

July 9, 2025 - Diana Ionescu

Map of Haussmann's redesign of Paris in the 1850s through 1870s under Napoleon III.

In Urban Planning, AI Prompting Could be the New Design Thinking

Creativity has long been key to great urban design. What if we see AI as our new creative partner?

June 30, 2025 - Tom Sanchez

View of dense apartment buildings on Seattle waterfront with high-rise buildings in background.

King County Supportive Housing Program Offers Hope for Unhoused Residents

The county is taking a ‘Housing First’ approach that prioritizes getting people into housing, then offering wraparound supportive services.

July 11 - Real Change

Aerial view of suburban housing near Las Vegas, Nevada.

Researchers Use AI to Get Clearer Picture of US Housing

Analysts are using artificial intelligence to supercharge their research by allowing them to comb through data faster. Though these AI tools can be error prone, they save time and housing researchers are optimistic about the future.

July 11 - Shelterforce Magazine

Green bike share bikes parked in a row on a commercial street with outdoor dining and greenery.

Making Shared Micromobility More Inclusive

Cities and shared mobility system operators can do more to include people with disabilities in planning and operations, per a new report.

July 11 - Cities Today