Vallejo's finances worry vendors with city contracts

Times-Herald reports:

Vallejo's pending bankruptcy may push the city to sail uncharted waters, but some supply vendors who receive city contracts are not comfortable with the voyage, city officials said.

So far, top official reassurances have mollified up to seven city suppliers, but likely will not stem the flow of concerned phone calls in coming months, city Public Works Director Gary Leach said Monday.

"They're still spending money out there, so they want to make sure they're going to get paid," said Leach. "We can't guarantee them, because nobody's gone through it before. (But) we're reassuring them that these funds have to be used for an intended purpose."

Unlike the more common Chapter 11 bankruptcy for businesses, a Chapter 9 bankruptcy judge does not take control of the city and force it to sell off its assets to pay its debts. Instead, the judge will first ascertain Vallejo's financial insolvency, then direct the city and its debtors to sit down and work out new deals, if needed. The city also will be expected to devise a plan to carry itself out of debt.

Leach said he has been telling vendors that bankruptcy will not affect separate funds with specified purposes. Some concerned calls that Leach knew of included suppliers for large city capital fund projects, bus and ferry service operators and the Wilson Avenue project suppliers, to name a few.