Perhaps not coincidentally, #1 Vallejo was the first municipality in this present downturn to go bankrupt, way back in 2008, and #3 Stockton entered bankruptcy recently. Stockton is a classic exurb (of SF) whose home prices got bid up way too high during the subprime bubble and then people came to their senses and realized that they didn't want to pay $4 per gallon to commute four hours per day to live in Stockton. 

But Vallejo is more of a suburb of SF, with what ought to be a pretty nice location right on San Francisco Bay. It got ripped off big time by its public safety unions during the bubble. Michael Lewis wrote a Vanity Fair article about Vallejo that I commented upon in VDARE last year:

Diversity makes public affairs ripe for exploitation by highly unified groups, such as the prison guards' union and local firemen. Lewis reported on how Vallejo’s fire department is an island of cohesion in a sea of anomie. 

Moreover, because the vibrant residents of Vallejo tend to set their houses on fire more frequently than the duller residents of less diverse Northern Californian communities, the Vallejo FD attracted some of the most gung-ho firefighters from all over the region. 

Not surprisingly, the Vallejo fire department—a rare institution in Vallejo with a high degree of what Harvard political scientist Robert D. Putnam calls “social capital,” or espirit de corpsamong its employees—managed to outmaneuver the divided and listless citizenry in grabbing a slice of the pie bigger than could be afforded by the populace’s mediocre ability to generate wealth.