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According to a story in the May 4 Wall Street Journal, the city of Vallejo, which entered bankruptcy in 2008, should emerge by July. The city of 120,000 is 30 miles northeast of San Francisco. In the years leading up to the bankruptcy, the city's expenses grew by 11% annually while revenue only went up 3%. Salary and benefits for police and firefighters accounted for 70% of the $65 million budget, according to the Journal. The city reduced the police from 150 officers to 90, closed fire stations and reduced firefighters from 120 to 70. Healthcare benefits for 400 city worker retirees and surviving spouses will be be reduced, with the city contributing $300 a month premiums, down from $1,500 for some retirees. But current pension payments will remain in place. Original bondholders came out unscathed, but Union Bank, which had insured the bonds, was owed about $50 million but will receive 40% less than that. The bankruptcy cost Vallejo more than $9 million, largely from legal fees.

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Comments

SanDiegoParrothead May 5, 2011 @ 12:26 p.m.

Since they couldn't reduce the pensions, why didn't they say that the pensions are so out of line, we want to pay $0 in retiree health care premiums and drop coverage for spouses?

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Don Bauder May 5, 2011 @ 1:51 p.m.

You'll have to ask Vallejo officials. The more important question is why they didn't challenge the notion that pension promises are set in cement, and no one can break them, even if a city goes bankrupt. Vallejo might have thought it would be too expensive to challenge this destructive legal interpretation alone. Best, Don Bauder

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SurfPuppy619 May 5, 2011 @ 4:35 p.m.

Since they couldn't reduce the pensions, why didn't they say that the pensions are so out of line, we want to pay $0 in retiree health care premiums and drop coverage for spouses?

=================== What makes you think they couldn't have reduced pensions??? They didn't even try. If they would have tried they would have had them reduced, there can be no doubt about that.

I followed the Vallejo Bk closely, and the council there has a public employee majority, which is why they did not go after pensions, and why they indemnified the PD from any future litigation (who the hell does something like that in the real world, made no sense at all except stright up corruption- a clean give away to the police union), and why they continued to give away the farm to the PD and FD in raises even while they were in BK court.

The BK filing was a stoopid move because the council was NOT willing to put the screws to the PD and FD and extract serious concessions, which is the power position the City was in when they filed BK. Why file BK if you're not going to make use of the power it gives????

Remember, this is a city where the median income is $30K and the average ff is comping $220K before overtime. $260K with overtime.

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Don Bauder May 5, 2011 @ 5:51 p.m.

I agree that in the BK, Vallejo should have tried to reduce pensions. Still, they got significant concessions, and wrapped it up in three years with only $9 million of expenses. Best, Don Bauder

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JustWondering May 5, 2011 @ 4:23 p.m.

It's nice that Vellejo decided to follow the Constitution of the State of California (Article 1 Section 9) as well as the United States Constitution (Article 1 Section 10).

The framers of US Constitution understood the value of contract(s) and realize their importance to growing nation then and a thriving nation now. Nonetheless, the framers also saw fit to include bankruptcy statues under the purview of federal jurisdiction as a form of check and balance.

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SurfPuppy619 May 5, 2011 @ 4:40 p.m.

Oh brother, JW is citing the old Contracts Clause, now you know we are in an alternate universe.

BK courts have the power to completely wipe out contracts and their liabilities-or did JW sleep thru the Title 11 of the United States Code lectures in his Contracts Clause class????????

BTW-the Contracts Clause can mean whatever a judge wants it to mean, ot is like a rubber band that can be strectched into anythinbg a federal judges wantes to shape it into.

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tomjohnston May 5, 2011 @ 7:56 p.m.

Over 2 yrs ago, the bk judge said the city of Vallejo had the authority to void its existing union contracts and that public workers do not enjoy the same protections Congress gave union workers at private companies. Under Chapter 9 munies can re-write cba's. But what of changing the benefits of those already vested or receiving benefits? It took me a while to find this, but it's something that was refered to in something I read a while back. It seems to suggest that in some cases intent of the courts is to prevent local governments from taking away already accrued benefits without providing comparable benefits in exchange, but not to prevent a local governments from modifying pension benefits that have not yet been earned. Maybe that's why no one has taken it on yet.

http://www.seethebenefits.com/showarticle.aspx?Show=4462

http://scocal.stanford.edu/opinion/kern-v-city-long-beach-25962

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Don Bauder May 5, 2011 @ 8:37 p.m.

Expense of pushing this case is clearly a deterrent. I have suggested that several municipalities agree to go bankrupt at the same time and divide up the cost of taking this all the way to SCOTUS. Best, Don Bauder

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Don Bauder May 5, 2011 @ 8:34 p.m.

Judges, remember, are government employees. This case will go to the Supreme Court. That will be expensive. Best, Don Bauder

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JustWondering May 6, 2011 @ 9:19 a.m.

Puppy you're as bad as the Obama Administration and its changing story on the demise of Bin Laden. How many ways are you going to tell it?

Why do all these attorneys, except you of course, refer back to the Commerce clause and pension contracts when evaluating cases with their clients?

The Supreme Court's decision in the OC case is another example where you told us trial courts don't know what they're doing and don't count. You guaranteed it would be reversed at the Appellate level and decided at the Supreme Court. Well you were right about Moorlach and his crazy theories taking it up the chain, but as usual you were wrong on the outcome at each and every level. In fact, so wrong the Justices refused to waste the Courts time and the taxpayers money listening to his wacky ideas.

BTW, just as most attorney's who champion losing positions like yours, you failed to point out my second sentence thus twisting the record. I said, "...the framers also saw fit to include bankruptcy statues under the purview of federal jurisdiction as a form of check and balance."

So on the advice of counsel Vellejo negotiated it way through bankruptcy. The same things are happening here in San Diego. Negotiations between the parties outside of bankruptcy court and ridiculous attorney fees are reducing the UAL. The recent decision regarding retiree health benefits is just another example.

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Don Bauder May 5, 2011 @ 8:18 p.m.

It's beginning to sound like the immovable object vs. the irresistible force. One is a commitment that you believe is cemented into law, and the other is the fact that states and municipalities can't meet those commitments financially. Contracts can be broken in bankruptcy court. Vallejo didn't try that, perhaps because labor is so strong there. Best, Don Bauder

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JustWondering May 6, 2011 @ 9:26 a.m.

Or maybe Don, it's just morally wrong to break your word. I'd love to depose Pete Wilson, under oath, regarding his promise of retiree health insurance for City employees in consideration for the vote to leave Social Security and Medicare in 1982. Don't you want to know what the City did with all that money over the last 30 years?

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Don Bauder May 6, 2011 @ 4:30 p.m.

It's hard to me to swallow that any contract broken in bankruptcy court is a case of moral turpitude. Best, Don Bauder

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Visduh May 5, 2011 @ 7:46 p.m.

If anyone is still willing to live in Vallejo, unless on welfare, I'd really wonder. The commentary above would make me conclude that Vallejo didn't do much to solve its out-of-control costs, and that it will be soon back in a fix. Prediction: Vallejo will be BK again within seven years.

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Don Bauder May 5, 2011 @ 8:38 p.m.

Yes, Vallejo could go back in the tank again -- no question. Best, Don Bauder

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SurfPuppy619 May 5, 2011 @ 10:02 p.m.

The commentary above would make me conclude that Vallejo didn't do much to solve its out-of-control costs, and that it will be soon back in a fix

Exactly!

They are going to be right back in BK, their BK case did not address their cash flow problems-huge public safety giveaways- and were not properly renegotiated.

And if they file BK again they have AGREED to indemnify the PD for ALL legal costs in a new BK case. That makes NO SENSE at all, except as a quid pro quo pay off. This is why public unions cannot collective bargaining with elected officials they bribe them. There is NO bargaining in collective bargaining in public employment. All one sided deals.

And like I said, it is a POOR city, average salary is around $30K.

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tomjohnston May 6, 2011 @ 1 a.m.

According to this in 2009 the median family income in Vallejo was $71,275 and the per capita income $26,455. In San Diego it's $75,492 and $32,348. Up in my neck of the woods it's $52,932 and $27,070 no data on average salary. Census 2010 data for Ca. is to be released next week.

http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=Search&geo_id=&_geoContext=&_street=&_county=vallejo&_cityTown=vallejo&_state=04000US06&_zip=&_lang=en&_sse=on&pctxt=fph&pgsl=010

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Don Bauder May 6, 2011 @ 7:32 a.m.

If per capita is $26,455 then SurfPup is right: the average is quite low. Best, Don Bauder

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tomjohnston May 6, 2011 @ 8:08 a.m.

Barely $600 a year less than L.A. and San Diego is about only $500 a month higher. Of course, I'm sure San Diego has a far higher percentage of service industry related jobs than does Vallejo and probably many of the uberwealthy earn their money from companies headquartered elsewhere.

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Don Bauder May 6, 2011 @ 4:33 p.m.

In the calculation of average salary per capita, it makes no difference if the superrich's company is headquartered elsewhere. It's money received by a San Diegan. Best, Don Bauder

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tomjohnston May 6, 2011 @ 4:40 p.m.

Unless some of those uberrich don't make San Diego their legal place of residence. Is it possible that some of them have chosen a state with a lesser, or perhaps no state income tax?

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Don Bauder May 6, 2011 @ 7:31 a.m.

An average salary of $30,000 sounds low. Are you sure? Best, Don Bauder

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SurfPuppy619 May 5, 2011 @ 10:06 p.m.

Prediction: Vallejo will be BK again within seven years.

Since their public safety compensation demons were not slayed, it is guaranteed they will be in BK court again.

The problme is this, a current city council can bind all future city councils for literally decades down the road by giving increased pensions or indemnifing the unions from legal or other costs, that should not be allowed.

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Don Bauder May 6, 2011 @ 7:34 a.m.

The same thing happened in San Diego. A city council bound later councils to unrealistically high salaries and pensions for public workers. Best, Don Bauder

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SurfPuppy619 May 6, 2011 @ 9:04 a.m.

I did not look up the Valleo income stats, I was going off what I recalled during the BK debates, and what I recalled was the average ff and cop comping $220-$240K in base, and $300K with OT, and people saying that $300K was 10 times the median (or mean??) income in Vallejo.........of course the Sgt, Lt and Captain were all making close to $300k in BASE salary alone as I recalled from a few years ago.

Whatever the numbers were, the spread bewteen the people wholived in Vallejo and the Vallejo FD/PD was tremendous.

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Don Bauder May 6, 2011 @ 11:11 p.m.

It's possible that top government pay in that town is grossly excessive. I really don't know. I do know it was government employment that took up most of the budget, putting the city under. Best, Don Bauder

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JustWondering May 6, 2011 @ 9:44 a.m.

Statistics never lie: Those whom interpret then, being human, if not always, but certainly often, interpret them incorrectly.

Using median family income shows $71.2K and DOES NOT include the value of benefits as the puppy when posts his ridiculous numbers. His figures are ALWAYS apples and oranges.

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SurfPuppy619 May 6, 2011 @ 4:43 p.m.

1- I was not referring to "family" income.

2- Fringe beenfits for the real world are between 0%-25%, byt the majority of all private sector jobs offer no benefots, no pension, no paid vacation or holiday time off.

Fringe beenfits for the Vallejo PD/FD were more than 60% of base salary using Calpers numbers on ROI, if using realistic ROI numbers it is easily more than 100% of base salary.

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Don Bauder May 6, 2011 @ 11:15 p.m.

I question that the majority of private sector jobs offer no benefits, no pensions, no paid vacations or holiday time off. That does not figure at all. Best, Don Bauder

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SurfPuppy619 June 2, 2011 @ 10:10 p.m.

I question that the majority of private sector jobs offer no benefits, no pensions, no paid vacations or holiday time off.

41% of ALL jobs in America today are minimum wage, or within a $1 of minimum wage, and I guarantee you the benefits are zero for most of them.

It is not hard to see the majority of American jobs today having no benefits. When I worked at Trader Joe's 75% of the labor was from the part timer employees. NO benefits of any kind whatsoever. very common.

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Don Bauder May 6, 2011 @ 11:13 p.m.

In don't recall SP using median family income. I thought he used income or salary per capita. Best, Don Bauder

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