California’s potholed city presents view of the future
By Richard Waters in Vallejo
Published: January 18 2011 18:34 | Last updated: January 18 2011 18:34
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| Douglas Robertson, Fire Chief for the city of Vallejo, California, talks about the cutbacks to the city’s fire service in front of a recently shuttered firehouse in the city’s Mare Island area |
For an image of the future that is guaranteed to chill US civic leaders and bondholders alike, there is no better place to look than among the potholed streets and boarded-up houses that litter the Californian city of Vallejo.
Frank Caballero, who has repaired the streets here for 31 years, says the roads department has lost two thirds of its workers, and only three people are left to carry out maintenance.
Matt Mustard, a Vallejo police detective, says that his department has lost 40 per cent of its staff in the past five years.
“It’s like any other customer service-based business – there’s a certain amount of work that needs to be done, and you do it,” says Mr Mustard. That has meant directing the efforts of the city’s remaining 90 officers to solving murders, muggings, rapes and assaults. Crimes against property often go uninvestigated.
It is two years since the blue-collar city of 115,000, perched on the north-east corner of San Francisco bay, did what for many involved in municipal government would be the unthinkable, and filed for bankruptcy.
It is unlikely to be alone for long. A strained property tax base, dwindling industrial activity and the aftermath of decades of generous pay and pension deals for city workers are taking their toll on many cities across the state.
“Vallejo was just the first, the [union] contracts were the most outrageous and the resources got exhausted first,” says Marc Levinson, the city’s bankruptcy lawyer.
Vallejo’s decline has been a long time coming, though it has been interrupted along the way by intermittent housing booms and – in common with much of California – a steady population increase that helped to pad its tax base.
The closing of the US naval base on neighbouring Mayer Island in the 1990s robbed the city of one important source of activity and the population, after jumping during the previous 20 years, has fallen in the past decade.
“They are not going to be able to tax their way out of this or cut their way out of this,” says Mr Mustard.A failure to build up the local tax base by attracting new businesses has left the city facing hard choices. That is even after budget measures since the bankruptcy filing that have included union concessions and slashing the health benefits of retired city workers from $1,500 to $300 a month.
Vallejo is the tip of a far bigger public deficit iceberg in California, warns Joe Nation, a professor of public policy at Stanford University.
Many cities and state institutions are still not facing up to the implications of the pension promises they have made during the past decade or so, he says – ever since a 1999 state law that boosted benefits, allowing some workers to retire in their early 50s on 90 per cent of their salaries. With many cities falling into line with this new norm, the unfunded liabilities total $600bn, Mr Nation calculates.
Escaping these commitments will be hard – even in bankruptcy. Unlike private pension arrangements, those for public workers can not be undone. That will force Vallejo to set unpopular precedents.
In an official disclosure statement that was due to be filed with the bankruptcy court on Tuesday, the city was due to lay out details of how it expects to meet the five-year financial plan its council adopted late last year.
Bond investors were expected to be put in the unusual position of being asked to take a rare loss from a municipal investment, potentially casting a cloud over other public debt issues. Meanwhile, the city’s unions were braced for the bankruptcy court to try to override labour laws that guarantee their contracts.
If accepted by all the city’s creditors, the plan could see Vallejo emerge from bankruptcy before the summer, says Mr Levinson – though he adds that the unions and retirees have shown no inclination so far to make the concessions that would make this possible.
With legal bills mounting towards $10m, Mr Levinson says that the mess in Vallejo has at least served as a warning to other cities that might have seen bankruptcy as an easy way out of their problems.
He adds: “You have to be crazy to file a bankruptcy case because you’ll spend money on lawyers you should be spending on firefighters and police.”
As one local labour lawyer warns, anyone who promises Vallejo’s early exit from bankruptcy is probably “whistling in the wind”.
Cuts to firefighting in quake zone
Two of Vallejo’s eight fire engines have been mothballed and two more put up for sale, says fire chief Doug Robertson. The city has also cut nearly half of its 122 firefighters since going into bankruptcy nearly three years ago, writes Richard Waters.
That has forced the fire department to make tougher choices about when to send out fire engines in response to emergency calls, Mr Robertson says.
However, he still worries about what would happen if a disaster were to hit the city, which sits on the Hayward faultline, one of the region’s most unstable earthquake zones. “We’ve had fires in the past that our current staff couldn’t handle,” the fire chief says.
With around half of its employees in the fire and police departments, the city has had little option but to make deep cuts in spending on public safety.
Its main unions – for firefighters, police and general city workers – have all accepted pay cuts in contracts agreed since the bankruptcy.
Clauses guaranteeing minimum staffing levels have been dropped, and there is no way to tell when the job cuts will end, says detective
