SAN FRANCISCO — The city of Vallejo filed for bankruptcy protection yesterday to deal with a ballooning budget deficit caused by soaring employee costs and declining tax revenue.

The San Francisco Bay area suburb of about 120,000 residents became the largest California city to seek bankruptcy protection.

Mayor Osby Davis said the city's attorneys filed papers seeking Chapter 9 bankruptcy protection in federal court in Sacramento.

"We've exhausted all avenues at this point, and this is all we had left," Davis said. "I had hoped to avoid it all the way up until yesterday. It's something we can't avoid. ... We can't pay our bills."

Vallejo will ask the judge to set a June 9 deadline for creditors to challenge the filing, said Marc Levinson, the city's bankruptcy attorney. If there are no objections, the city automatically enters bankruptcy protection.

The seven-member City Council voted to authorize the city manager to file for bankruptcy protection on May 6 after months of failed negotiations with its police and firefighters unions.

Vallejo, a mostly working-class city about 30 miles northeast of San Francisco, faces a $16 million budget deficit in its fiscal year starting July 1.

In addition to being the largest California city to file for bankruptcy protection, Vallejo is the first to do so because its revenues cannot cover expenses, experts say.

Orange County filed for bankruptcy protection in 1994 after it lost money in a series of bad investments, and the Southern California town of Desert Hot Springs filed in 2001 after losing a lawsuit.