Excessive Labor Costs Force Vallejo to Vote for Bankruptcy
The Vallejo city council voted unanimously to file for bankruptcy late Tuesday (May 6). Excessive labor costs are the main factor, although the Bay Area suburb has also been hit by the housing crisis lowering property values and the state grabbing a large share of local tax receipts. Vallejo faces a $16 million deficit in the 2008-2009 fiscal year that begins July 1. The city's representatives tried to bargain with labor unions, but to no avail. A chapter 9 bankruptcy should allow Vallejo to stave off creditors temporarily. City coffers could run dry as early as June 30.
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