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Bankrupt San Bernardino raids restricted funds to make payroll

PHOTOS: California cities in bankruptcy

A flurry of political sniping and finger-pointing kicked off the San Bernardino City Council’s efforts to slash city spending by 30% Wednesday night, the first difficult step the city must take after filing for bankruptcy protection earlier this month.

San Bernardino’s financial situation is so dire that the council voted to raid the city’s restricted funds in order to pay its employees Thursday.

"If I don’t have the restricted funds, I won’t be able to make payroll," interim City Manager Andrea Travis-Miller told the council Wednesday night. "We are very close to falling over that cliff.''

PHOTOS: California cities in bankruptcy

During the seven-hour marathon meeting, council members also were presented with a proposed budget plan to keep the city solvent through July. Faced with a $45.8-million budget shortfall, the austerity plan calls for a 30% cut in spending, layoffs of at least 100 city employees, closing three library branches and possibly rotating fire station closures.

Even if the council approves all of those measures, it wouldn’t be enough. The city would still be $7 million in the red, Travis-Miller said.

“The city of San Bernardino faces a fiscal crisis of staggering proportions," Mayor Patrick Morris said.

The council session was steeped in controversy before it even began, after city officials announced the council initially would review a budget-slashing plan in closed session -- out of public view.  After being blistered by the local newspapers, and getting an earful from residents, Morris and the council reversed course and decided to hold the hearing in an open, public session at City Hall.

The council then started arguing over whether the hearing should be postponed, since the meeting was originally scheduled to last for three hours and end at 7 p.m. Morris shot down any delay, saying that the matter "was critically important" and that the council often held marathon budget sessions.

Morris was quickly attacked by City Atty. James Penman.

"We never had a mayor who led us into bankruptcy, but now we do," said Penman, who had unsuccessfully challenged Morris for mayor.

Penman’s comment prompted boos and catcalls from the audience inside the council chamber.

San Bernardino earlier this month became the third California city to declare insolvency this year, joining the Central Valley city of Stockton and Mammoth Lakes in the Eastern Sierra Nevada.

The action came after Travis-Miller told the council that San Bernardino would probably not have the money to make payroll in August.

Both the U.S. Department of Housing and Urban Development and state Department of Finance already have launched special audits of the city’s finances after San Bernardino officials acknowledged that the city had improperly borrowed from restricted accounts to help keep the city afloat.

RELATED:

Pension debt still a problem for cities

San Bernardino bankruptcy: Officials knew of risks for years

San Bernardino bankruptcy: Other California cities could be next

-- Phil Willon

Photo: The San Bernardino City Council voted in July to declare a fiscal emergency and file for bankruptcy protection. Credit: Kirk McKoy / Los Angeles Times

 
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L.A. Now is the Los Angeles Times’ breaking news section for Southern California. It is produced by more than 80 reporters and editors in The Times’ Metro section, reporting from the paper’s downtown Los Angeles headquarters as well as bureaus in Costa Mesa, Long Beach, San Diego, San Francisco, Sacramento, Riverside, Ventura and West Los Angeles.
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