Posted on July 11, 2012

San Bernardino Seeks Bankruptcy Protection

Phil Willon, Los Angeles Times, July 10, 2012

San Bernardino on Tuesday became the third California city in less than a month to seek bankruptcy protection, with officials saying the financial situation had become so dire that it could not cover payroll through the summer.

The unexpected vote came at the suggestion of the interim city manager, who said the city faces a $46-million deficit and depleted coffers.


Mayor Patrick Morris called the decision, passed on a 4-2 vote, a “stain” on the city. But he said the only other option was “draconian cuts” to all city services, including the police and fire departments.

“It means the bills will be paid,” said a dejected Morris, who is not a voting member of the council.

The city’s fiscal crisis has been years in the making, compounded by the nation’s crushing recession and exacerbated by escalating pension costs, lucrative labor agreements, Sacramento’s raid on redevelopment funds and a city reserve that is tapped out, officials said.

Miller told the council that the city faced major deficits for the next five years.

The deficits remain even after the city negotiated $10 million in concessions from employees and slashed the workforce 20% over the last four years.

The expected bankruptcy for the city of 209,000 residents is certain to heighten concerns about the fiscal forecast for other struggling California cities, which have been slashing jobs and services as tax revenues have declined during the prolonged economic slump.


City Atty. James Penman said city budget officials had falsified documents presented to the mayor and council for 13 of the last 16 years, masking the city’s deficit spending.


Morris was taken aback by the comments, saying this was the first time he has heard of the allegations.


Councilwoman Wendy McCammack said San Bernardino had little choice. Miller, the city manager, said that even if the council eliminated all services except for the police department, it would not be enough to pull the city out of its financial tailspin.


Filing for municipal bankruptcy protection will allow San Bernardino to renegotiate contracts, including those with employees, and stave off creditors while officials restructure the city’s finances. Current employee pension obligations, one of the contributors to the city’s financial straits, will not be affected, officials said.

San Bernardino’s tax revenues have declined by as much as $16 million annually over the last few years, primarily because of drops in sales and property taxes.

The city joins two others in California — Stockton and Mammoth Lakes — that have turned to bankruptcy in recent weeks to cope with their financial problems, albeit for different reasons.


[Editor’s Note: According to the 2010 census, San Bernardino’s population is 19 percent white, 60 percent Hispanic, and 15 percent black. In 1970, whites were 65.6 percent of the population.]