California City to File for Bankruptcy

Vallejo is set to become the largest California city to file for bankruptcy.

May 8, 2008— -- VALLEJO, California (AP) -- Vallejo is set to become the largest city in California to declare bankruptcy after leaders voted in favor of it to solve the San Francisco Bay Area suburb's spiraling budget crisis.

The city council voted unanimously Tuesday night after hours of public comment.

City Manager Joseph Tanner had advised filing for bankruptcy before the city's fiscal year ends on June 30 because Vallejo faces a projected budget deficit of $16 million (euro10.3 million) and has no money in its reserves.

Many officials and residents attribute Vallejo's fiscal troubles to overly generous pay and benefits to the city's police and firefighters.

The decision came after two years of negotiations with the police and firefighter unions failed.