Vallejo, CA goes belly up.
Printable View
Vallejo, CA goes belly up.
My husband works in Vallejo... that town is SHIT. No one who has 1/2 a brain would live there...
Vallejo actually isn't alone in being up to their eyeballs in bond debt ... but they are the first this year to choose the bankruptcy route. Essentially it boils down to a situation where the local population has been maxxed out in regard to local property taxes, sales taxes etc., where state mandates require that the city spend X dollars per year to cover MediCal recipient and other social welfare benefit costs etc., and where unionized public servants i.e. teachers, police, firefighters, maintenance workers etc. all refuse to accept pay cuts or pay freezes or benefit cuts.
The bankruptcy allows the city to void existing contracts with the unionized public servants ... with the city council undoubtedly hoping that existing teachers, cops, firemen, maintenance workers etc. will accept pay cuts as a less objectionable alternative to being unemployed. Of course this also runs the risk that crime will become rampant, that schools will have 50 children per class in the fall etc.
Most curious will be the reaction of California state gov't in terms of helping to 'bail out' the city of Vallejo. I'm sure that this will be called for, but I'm also sure that state legislators are aware that Vallejo is only the tip of the oncoming iceberg - such that bailing out Vallejo would set a precedent where the state must also bail out 20 other cities next year. With the state gov't already facing a 35 billion dollar deficit of its own, an unanticipated state expenditure to bail out Vallejo and other overspending California cities just isn't very likely to happen.
As often discussed in a different context, 'service economy' jobs are about to be cut big time. Except this time those 'service economy' jobs will be teachers, cops, firemen and gov't contractors. Ultimately, to be sustainable, the cost of the 'service economy' has to be picked up by some other segment of the population that actually creates added value. Vallejo had few enough such industries to start with, and many of them were disproportionately tied to the ailing housing industry.