Administrators said the budget has a $17 million shortfall, the Los Angeles Times reported. The police and fire departments get about 80 percent of the budget.

"I had hoped that even at the 11th hour and 59th minute we could come up with an alternative," Mayor Osby Davis said.

Davis said the bankruptcy could mean the end of two redevelopment projects. The city will have a harder time borrowing and may be forced to cut services.

Vallejo, with a population of 125,000, lies on the north shore of San Pablo Bay, the northern extension of San Francisco Bay.

Juliet Musso of the University of Southern California called Vallejo's troubles "a continuation of the story of bust-and-boom cycles in California." She said the city apparently negotiated over-generous contracts with its employees in good times.

Another California town, Desert Hot Springs, declared bankruptcy in 2001. Orange County did so in 1994.