May 10

City leaders in Vallejo, California voted this week to resolve its worsening financial crisis by filing for protection under federal bankruptcy laws. In so doing, Vallejo will become the largest California municipality to file for bankruptcy.

The vote taken was unanimous, reflecting the reality of a $16 million budget deficit many in the area apparently blame on “overly generous” pay to firefighters and law enforcement officers, following two years of ultimately fruitless negotiations with those groups’ unions.

Bankruptcy for municipalities is governed by Chapter 9 of Title 11, in which is codified the Bankruptcy Code, as amended most recently by 2005’s Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Section 101(40) defines municipality to include any political subdivision or agency of a state; South Carolina counties would also fall within the ambit of this chapter.

Source: Chicago Sun-Times — “Vallejo to become largest California city to file for bankruptcy” (accessed May 7, 2008)