City of Vallejo, Calif., to remain in bankruptcy; case dismissal request denied

By Caroline Salls

Pittsburgh, Sept. 5 - The City of Vallejo, Calif.'s local chapter of the International Association of Firefighters' motion for dismissal of the city's Chapter 9 bankruptcy case was denied Friday by the U.S. Bankruptcy Court for the Eastern District of California.

According to the motion, the city is using the bankruptcy petition to avoid its contractual obligations to city workers and retirees without having made a reasonable attempt to address its costs and potential revenue sources.

The union claimed that the city is not insolvent because it is still making current interest and principal payments to bondholders.

However, judge Michael S. McManus said in Friday's ruling that a city is classified as insolvent under the Bankruptcy Code when it is unable to pay its debts as they come due. The judge also said the city was insolvent on its bankruptcy filing date because it would not have had enough money in its general funds to pay its debts.

"Because the city was unable to adopt a balanced budget for fiscal year 2008-09, it could not demonstrate the ability to pay back any loan with revenues generated in fiscal year 2008-09," McManus said in the ruling.

Additionally, the firefighters said Vallejo had numerous options for raising new revenue and cutting expenditures that would allow the city to meet its obligations through the next fiscal year and accumulate "millions of dollars in reserve."

McManus also said he was not persuaded by the firefighters' argument that the city's general fund would not be operating at a deficit if Vallejo had accepted an offer by its unions to modify collective bargaining agreements.

Vallejo filed for bankruptcy on May 23. Its Chapter 9 case number is 08-26813.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.