Here's proof that Vallejo is on the rebound: Pete Mustico, who's been a tailor on Georgia Street for 63 years, is busy again.

"It's not going to happen overnight, but I definitely think the city is coming back," said Mustico, 88. "Of course, I probably won't live to see it, but right now things look pretty good."

Vallejo has reason for optimism, even as the Solano County city grieves the shooting death of a police officer last week.

After three years of bankruptcy and a local economy that could best be described as catatonic, signs of life abound. A sales tax measure that would bring in $10 million annually is on the brink of passing, national retailers and manufacturers are moving back in, and a waterfront garage that was stalled for a decade is now close to completion.

"This city has been through a very difficult period, but right now we're stable," said Assistant City Manager Craig Whittom. "Although we still have a lot of work to do."

In its darkest days, the city hacked almost 25 percent of its general fund budget - about $20 million in all. That meant steep cuts to every service, including police, fire, road repair, museums, parks and everything in between.

Vallejo, a former state capital and one of the oldest cities in California, became a cautionary tale for hard-hit cities everywhere: What happens when a city goes completely broke?

Vallejo answered that question. First, after the shouting and accusations die down, you renegotiate employee contracts to rein in retirement and health care costs. Then you mercilessly cut city services. Next, you merge services with nearby cities. At the end, with some luck, you should have a balanced budget.

'Steep learning curve'

"It was a very steep learning curve," said City Councilwoman Erin Hannigan. "There was a lot of chaos, anger, frustration. But Vallejo's turned out to be very resilient."

Among the agencies most hurt by the cuts was the library. Vallejo drastically reduced its funding to the Solano County library system, resulting in fewer hours, staff, books and programs at the city's two libraries.

Vallejo may be on the rebound, but it could be years before those cuts are restored - devastating news for Vallejo residents who rely on the library for Internet access, job-hunting resources and other critical services in a down economy.

"We are the people's university. We unconditionally accept everyone who walks through our doors," said Peggy Yost, deputy director of the Solano County library system. "When you cut that, you're hurting the people who need us the most."

Bill Richerson, 57, who runs an antique store downtown, said he doesn't blame the city staff or council for the city's downward spiral.

"We're paying for mistakes that were made 30 years ago," he said. "The bankruptcy was a self-correction. It had to be done. We'd all like to think life should be a Norman Rockwell painting, but I think by now we know it's a lot more complicated than that."

Ups and downs

Mustico, the tailor, has seen Vallejo through countless ups and downs since he moved there with the military in the 1940s. When he started his business in 1948, Vallejo's downtown had numerous department stores, a bustling nightlife and jobs galore.

These days, many storefronts remain vacant, but Georgia Street has been spiffed up with new street lights, signs, sidewalk improvements, planters and historic markers.

"I love this town," Mustico said. "If I had a magic wand, I'd fix everything. But instead we just have hope. So that's all we can do."