Vallejo, a working-class community 30 miles northeast of San Francisco, has emerged from its Chapter 9 bankruptcy filing with a new found commitment to community involvement, exemplified by its upbeat 116,000 residents and the local government’s new focus on innovation.

The community offers both good and bad examples of what can come from a Chapter 9 filing.

Vallejo’s Road to Bankruptcy

It was a slow downward spiral to bankruptcy for the community that began with the closure of Mare Island Naval Shipyard in 1996. The city was facing a $16 million deficit by 2008. In an attempt to help the situation local leaders held 11 mediation sessions with public employees. These employees’ salaries and benefits accounted for about 75 percent of the $80 million general fund budget. Local leaders were unable to reach an agreement.

Nationwide, there may be only one or two municipal bankruptcies in a year. While bankruptcies are rare, the struggling economy is forcing them to become more prevalent.

Still Reeling

Things were worse than anyone imagined they could be be after the initial filing – road maintenance was cut by 90 percent, staffing at the police and fire departments were nearly halved. Grants for arts and recreation programs were completely eliminated.

The financial fixes envisioned when the city initially filed in 2008 have not materialized. Vallejo continues to operate in the red.

“Bankruptcy brings a brutal recognition of the new normal,” said Vallejo Councilwoman Stephanie Gomes. “It’s Darwinism. The cities that are going to stay solvent are the ones that can evolve.”

Attitude Adjustment

But if there is one silver lining, Gomes said bankruptcy provided the city with a needed attitude adjustment. The filing brought new leadership and ideas into government.

Additionally, residents have lowered their expectations for city services and have stepped in to fill the gaps – volunteers hold weekly graffiti cleanups, monitor the city’s high-end surveillance cameras and have even built a sprawling wooden playground.

While cobblestones show through the decrepit pavement, and prostitutes work the sidewalks in broad daylight, Sheila Dodson still wants to stay put and raise her family in her Vallejo.

“Just because the coffers are poor doesn’t mean there’s not opportunity,” she said.

For information and guidance on bankruptcy, you need the experts at Simon Resnick Hayes, Attorneys at Law.

Source: Huff Post, Vallejo Bankruptcy: California City Emerges From Financial Disaster (PHOTOS), July 22, 2012