Facing labor contract obligations that overwhelm expected revenues, the Vallejo, Calif., City Council voted May 6 to declare Chapter 9 bankruptcy. The city is facing a $10.1 million deficit and expects to deplete its general fund reserves by June 30.

Mayor Osby Davis, who previously stood with four city council members in opposition to bankruptcy, told The Mercury News that he had "turned over every rock he could find to find a solution." The four city council members also decided in favor of bankruptcy. The city continues to negotiate with its employees’ labor unions in an effort to reduce expenses.

Filing bankruptcy will allow the city to continue operating by freezing certain debts until a plan of negotiation can be approved, according to City Manager Joseph Tanner. It also will protect the city from enforcement actions by its creditors, including the unions.

A video of the May 6 meeting and staff reports on the bankruptcy are available at http://www.ci.vallejo.ca.us./GovSite/default.asp?serviceID1=253.