Tech & Biz

Vallejo California On Brink Of Bankruptcy

by mtippett | February 19, 2008 at 07:18 pm

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Municipal bonds have always been a very safe (and often tax-free) form of investment for those who have the capital requirements to participate in them. Now Vallejo has issued an ominous warning to those like Warren Buffet who have been their champion:

For 15 years the city council has been putting Band-Aids on the problem. (It has been) extending contracts and deferring payments for public safety to the next years as a way of balancing the current budget."

Public safety contracts for police and fire services make up 80 percent of the city's general fund.

"We've been spending more than we've been making for 20 years and it's time to pay the piper," Gomes said.

In a report to the City Council dated Feb. 13, Vallejo Finance Director Rob Stout projected that without deep cuts, including assumed agreements negotiated with police and fire departments by June 30, the City will be $6 million in debt and will have spent every last penny of its $4 million in reserves.