Two years after declaring bankruptcy, Vallejo is preparing to exit Chapter 9 protections after spending nearly $10 million on legal fees.

And the plan they’ve come up with still involves diminished public safety staffing, a road and infrastructure maintenance budget set at 10% of recommended level, and millions in debt.

Worst of all, the city still faces nearly $200 million in unfunded pension liability.

The limited success of the municipal insolvency has others across the state (and in fact the nation) questioning whether or not it is worth the pain.

In fact, even some of Vallejo’s City Council publicly speculate that negotiation may have been the better option. 


When Vallejo, California, filed for bankruptcy in 2008 after failing to win union pay cuts, Councilwoman Stephanie Gomes said officials around the U.S. would have their eyes trained on the city of 120,000.

She was right. The lesson they’ve taken from the two-year- old case, which has cost Vallejo $9.5 million in legal fees and made it a nationwide symbol for distressed municipal finances, is that out-of-court negotiations yield better results.

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