Should it come to it, Vallejo would not be the first American community to declare bankruptcy. Since the Federal government changed the rules allowing for municipal bankruptcy during the Great Depression, many local governments have sought that protection.

Here in California, Desert Hot Springs filed for bankruptcy after losing a lawsuit in 2001 and Orange County went bankrupt in 1994 as a result of $1.6 billion in losses on bad investments.

Whatever happens, Vallejo can survive and recover.

That doesn’t make it any easier for Vallejo. There is understandable outrage and alarm and there are different perspectives about how Vallejo came to this impasse.  A popular premise is that the city’s public safety agencies have unreasonably swelled in size and demands. 

The reality however, is Vallejo’s public safety -- as with the city’s budget -- has been shrinking in the last few years. The fire department is operating with 43 fewer firefighters than in 2000, even though the city’s population has grown significantly since then. The police department also has numerous vacancies and is in a hiring freeze.

This reality has produced pervasive mandatory overtime that naturally adds to the salaries of many overworked public safety personnel. The public safety unions gave painful concessions to stave off the city’s bankruptcy, resulting in salary rollbacks, coverage reductions and the closing of two firehouses. These losses, coupled with the aforementioned vacancies and the lack of a trauma center in Vallejo will leave the city with dangerous exposures.

But Vallejo’s financial difficulties are obviously more systemic than public safety: Twelve years ago the dominant financial core of the city closed and nothing has replaced it. Since the decommissioning of Mare Island, the city has been without a sustainable economic base. In 1996, the leadership of Vallejo would have been well served by working with base relocation and closure experts who might have identified transition opportunities. The Navy left behind a facility well situated to support a variety of manufacturing and light industry uses. But opportunities were lost through poor decisions about land use and an over reliance on housing development.

The current Chapter 9 predicament was primarily triggered by the foreclosure crisis. When the tenuous housing market gave way; Vallejo’s primary post-Mare Island revenue base collapsed.

While much has been made of firefighters’ salaries, the current city manager has a total compensation package of $474,000. Maybe he’s worth every penny of that, or maybe after extremely high turnover at the city manager position, that’s what it takes to land a top administrator. If he’s the man for the job, then the mayor and city council need to come together behind him. Tops on the list should be an investment strategy -- no small task for a city in bankruptcy. Nevertheless, the infrastructure is still there, it now needs some creative leadership and the investor confidence that will be engendered by a stable council and staff working relationship.

The city is not without some unique opportunities. Mare Island, for instance, also has significance as a national historic district -- including the great treasure of St. Peter’s chapel. Similar to American Canyon’s plan for a vibrant town center keyed off the basalt factory ruins, this important landmark replete with rare Tiffany stained glass windows could serve as the base of an historic cultural, visitors and recreation asset. 

Public safety is expensive, but not as much as its absence. Pensions are also expensive and perhaps the rules could stand some tightening, but pensions are not solely altruistic benefits to workers either: Pensions encourage employee longevity, as incentive for skilled workers such as firefighters and police officers, whose knowledge of a community is a prized commodity- to stick around for a whole career. 

Contrary to popular belief, labor unions are changing with the times and are initiating a greater role in the establishment and management of trusts for employee pensions and healthcare. Perhaps Vallejo would gain from such a cooperative union and administration innovation to relieve some of the city’s obligation while at the same time ensuring worker’s benefit security. 

Local governance is the governance that most directly affects people’s lives. If one subscribes to the notion that every crisis is also an opportunity, than perhaps in Vallejo’s current woes, there is the opportunity to explore new solutions to a distress that is increasingly familiar in communities across America. 

Vallejo is not the only city in America to lose an economic engine and to have city revenues shrink to the point that it encompasses public safety and little else. What strategies for creative and visionary public governance may emerge from this, and the degree of maturity and wisdom that the city’s leaders chose to display in the crucial next few months could yield valuable ideas for the very real challenges facing America’s decentralized and rapidly changing economic and community landscape.

Or, it could become just another cautionary tale.

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