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San Bernardino bankruptcy: Officials knew of risks for years

July 16, 2012 |  7:50 am

Officials in San Bernardino, which announced last week that it intended to file for bankruptcy, had known for years that the city's finances were becoming critical.

Two years ago, the City Council learned that San Bernardino's $22-million budget shortfall would jump to $38 million by 2012, sending the city into financial ruin.

At that point, city leaders slashed the workforce, extracted temporary concessions from labor unions and auctioned off public land. But they failed to heed warnings that those steps weren't nearly enough to address endemic problems in the Inland Empire city. Instead, calls for swift, dramatic action — such as raising taxes or outsourcing the police and fire protection jobs — fell victim to a noxious political atmosphere that has paralyzed City Hall throughout the economic crisis, according to interviews with past and present city officials.

DOCUMENT: San Bernardino bankruptcy report

"I told the council two years in a row that, if this continues, we're going to be looking at bankruptcy. I got criticized for bringing up the word 'bankruptcy.' They called it scare tactics," said former City Manager Charles McNeely, who resigned unexpectedly in May. "The politics of that place are just impossible to deal with."

McNeely wasn't surprised when the council, facing a $45.8-million budget shortfall in the current fiscal year, voted Tuesday night to seek bankruptcy protection, the third California city to do so in the last month. San Bernardino is broke, without even enough money to pay employees through the summer.

PHOTOS: California cities in bankruptcy

The possibility that city actions could lead to criminal charges was revived Thursday, after the county Sheriff's Department said it had launched an investigation several months ago into allegations of "possible criminal activity within departments of the San Bernardino city government." Officials did not elaborate. "The investigation is continuing and details will not be released at this time," the statement said.

City officials will discuss where to go from here at a meeting Monday.

"It is important to note that in order to balance the city's budget, deep cuts will have to be made across the board," interim City Manager Andrea Miller said in a statement released last week. "We will continue to provide essential services and are committed to meeting our obligations."The police and fire chiefs of the city held a news conference to reassure residents that public safety will not be compromised."


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-- Abby Sewell and Phil Willon in San Bernardino