Bloomberg News

Vallejo Judge to Weigh City’s Bankruptcy Exit Plan July 28

June 01, 2011

(Adds disclosure statement approval in second paragraph.)

June 1 (Bloomberg) -- The judge overseeing the case of Vallejo, California, the biggest U.S. city in bankruptcy, set a hearing for July 28 on whether to confirm its plan for financial reorganization.

U.S. Bankruptcy Judge Michael S. McManus in Sacramento, California, scheduled the hearing in a routine order yesterday, five days after he approved a disclosure statement for the plan. McManus will take creditors’ votes on that plan into account when he decides whether to approve the proposal.

The city during the bankruptcy cut labor costs by firing employees, renegotiated union contracts and reduced what it pays to subsidize retirees’ health care.

Vallejo, a onetime U.S. Navy town of about 120,000 on San Francisco Bay, sought protection from creditors in May 2008 under Chapter 9 of the U.S. Bankruptcy Code after the recession eroded tax revenue and unions rejected wage cuts. Chapter 9 allows municipalities to reorganize debt.

The plan doesn’t alter securities tied to designated revenue sources, such as about $175 million in water revenue bonds, and other special tax obligations secured by special revenue of the city’s restricted funds, according to the documents.

The case is In re City of Vallejo, 08-26813, U.S. Bankruptcy Court, Eastern District of California (Sacramento).

--Editors: John Pickering, Charles Carter

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at

To contact the editor responsible for this story: John Pickering at

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