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San Bernardino should file for bankruptcy, city manager says

July 10, 2012 |  7:29 pm

More photos: California cities in bankruptcy

San Bernardino’s interim city manager recommended Tuesday evening that the city file for bankruptcy protection, saying it may not be able to make payroll over the next three months.

"We have an immediate cash flow issue," Andrea Miller told the mayor and seven-member City Council.

Mayor Patrick Morris agreed that the city needed to take "bold action" but stopped short of throwing his support behind filing for bankruptcy. Still, Morris, a former judge, said that under federal law the City Council would retain its ability to set policy and fix the financial crisis and would not lose authority over the city to a bankruptcy judge or conservator.

PHOTOS: California cities in bankruptcy

"This is obviously a very sobering conversation," he said.

The city faces a $45.8-million budget shortfall in the next fiscal year. San Bernardino already has stopped paying some vendors, some of whom have filed liens against the city.

The council is hearing public testimony Tuesday evening about the fiscal crisis. It is unclear if the panel will vote on bankruptcy or other options during the meeting.

The dire fiscal situation remains even after the city negotiated $10 million in concessions from employees and slashed the workforce by 20% over the last four years.

"The city is still facing the possibility of insolvency due to a variety of issues including accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs," according to a budget analysis prepared for the council.

"The city has reached a breaking point and faces the reality of deficient cash on hand to meet its contractual and debt obligations," the report said.

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-- Phil Willon in San Bernardino

Photo: The housing bust, economic recession, pension costs and deficit spending have pushed the city of San Bernardino to the brink of bankruptcy. Credit: Los Angeles Times

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