MELISSA BLOCK, host:
Now, to California where a town outside San Francisco is on the verge of going broke. Vallejo, California has been hit hard by the sagging housing market. This week, town leaders will decide whether to declare bankruptcy.
NPR's Richard Gonzales reports.
RICHARD GONZALES: More than 200 people packed a hastily called town hall meeting in this blue-collar, former Navy town about 30 miles north of San Francisco.
Ms. STEPHANIE GOMES (Member, Vallejo City Council): Why are we here tonight? Because the city is facing a very severe deficit. We are on the brink of bankruptcy.
GONZALES: Stephanie Gomes is one of two city councilwomen who called this meeting to help explain to the public what bankruptcy might mean for the city of 120 thousand residents.
Ms. GOMES: And the council was told this: if the city doesn't do something by mid-April, we won't be able to pay employees' salaries.
GONZALES: The city budget faces a six-million-dollar shortfall. Gomes places a large part of the blame on contracts, the police and firefighters unions that chew up more than 80 percent of Vallejo's general fund.
Ms. GOMES: I think one of the good things about all of this attention on the potential for bankruptcy is that the public safety union have finally agreed that our numbers are real. Up until two weeks ago they said we were lying about the numbers and there was no fiscal crisis. So now, maybe, we can come face to face and get some real, honest negotiations and look at those contracts and negotiate fair wages and fair benefit packages.
(Soundbite of applause)
GONZALES: Gomes says Vallejo's budget problems were exacerbated by a 10 percent hike in police and firefighter salaries this fiscal year. But the unions say don't blame them for Vallejo's fiscal crisis. Fire Captain Jon Riley says his union's contract was negotiated fairly. Meanwhile, worries that the city will go broke recently prompted the mass retirements of 14 firefighters and seven police officers. Riley says they wanted to get out while the city still has some cash to pay retirement benefits.
Mr. JON RILEY (Veteran Fire Captain; Vice President, Firefighters Union Local 1186): I think it would be safe to say that morale in the Vallejo Fire Department has pretty much hit rock bottom. We lost about 325 years of experience that left in one day last week. Our department is pretty devastated at this moment.
GONZALES: This labor dispute couldn't come at a worse time. Assistant City Manager Craig Whittom says Vallejo is also being squeezed by the downturn in the housing market.
Mr. CRAIG WHITTOM (Assistant City Manager, Vallejo, California): Our sales tax, our core property tax, our transfer tax is flat or in decline as with many other communities. And Vallejo does not have a large corporate tax base. So in times when the residential market slows down, we are hit hardest.
GONZALES: That's also true of many other California cities. But urban finance experts say Vallejo is an extreme case because of its high public safety costs. Meanwhile, some Vallejo residents, like retiree Thomas Atkinson(ph), say there's plenty of blame to go around.
Mr. THOMAS ATKINSON (Vallejo Resident; Retiree): The city put themselves in this position. The voters elect the city councilmembers. And so, ultimately, I think it resolves with the citizens not paying attention to what was going on. Now, they're starting to pay attention, now that they're, you know, in this horrible situation.
GONZALES: Others, such as Russ Barnes, who runs a marine construction company, are taking a wait-and-see approach.
Mr. RUSS BARNES (Vice President, Marine Construction, Cooper Crane & Rigging): In 10 years, the city of Vallejo is still going to be here. We will work through this somehow. The sky is not falling. It is scary. It is unsettling. It is distracting, but Vallejo is a wonderful town.
GONZALES: In Vallejo, the sky may not be falling, but the boom times are definitely over. Many believe there's a silver lining in the dark cloud hanging over the city, but they're still trying to figure out how to get to it.
Richard Gonzales, NPR News, San Francisco.
BLOCK: What happens when a municipality goes bankrupt? You can find out at npr.org. Transcript provided by NPR, Copyright NPR.
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