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San Bernardino may file for bankruptcy

July 10, 2012 |  5:38 pm

San Bernardino
Facing a mounting budget deficit and dwindling tax revenue, the San Bernardino City Council on Tuesday is scheduled to consider drastic budget cuts, possibly filing for bankruptcy, to save the city from financial ruin.

The city’s fiscal crisis has been years in the making, triggered 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, city officials said.

“Deficits of major proportions are projected” for the next five years, Interim City Manager Andrea Miller and Director of Finance Jason Simpson said in a letter to the council.

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

The city faces a $45-million shortfall in the next fiscal year, and has seen tax revenue decline by nearly $16 million annually over the last few years, according to the financial analysis presented to the council. The city’s general fund, which pays for police and fire protection, had an estimated $114 million in revenue and $129 million in expenditures for the current fiscal year, city financial records show.

Along with raiding taxes and slashing city services, including the city’s Police Department, the mayor and seven-member council will consider filing for Chapter 9 bankruptcy protection, the portion of the federal bankruptcy code set aside for municipalities.

If San Bernardino votes to declare bankruptcy, it would be the third California city to do so in recent weeks, joining Stockton and Mammoth Lakes. The council called special back-to-back budget meetings Tuesday and Wednesday, which are expected to attract a packed house at City Hall.


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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