Friday, July 13, 2012

Another California city files chapter 9 bankruptcy, San Bernardino

"With a third California city deciding to declare bankruptcy within two weeks, questions remain about whether they're canaries in California's economic coal mine or just a few outliers that couldn't sustain their spending amid an economic downturn.
San Bernardino downtown

Stockton, with a population of almost 296,000, two weeks ago became the largest U.S. city ever to seek bankruptcy protection. Mammoth Lakes, a Mono County town of about 8,300, followed suit July 3.And the city council of San Bernardino, with almost 212,000 residents, did likewise Tuesday night. Mammoth Lakes is a special case, hit with a $43 million judgment in a developer's breach-of-contract lawsuit; the town's current general-fund budget is only $19 million.

.... "Overall across the state we're going to see more of these, and I'm surprised to see anybody surprised by it," said former state finance director Mike Genest, now a fiscal policy consultant. "Many of us have been predicting a substantial number of municipal bankruptcies in California for quite some time, and those predictions are starting to come true."  Times-Herald/Josh Richman/Media News Group (serving Solano and Napa Counties), 7/12/12, "Are cities' bankruptcies flukes, or first dominoes to fall?"  Read Article.

  North of town
San Bernardino.  "Law enforcement officials said Thursday that they have an open criminal investigation regarding allegations of misconduct in the city government of San Bernardino, which announced this week it was going to file for bankruptcy.   ...  There have been allegations that some financial documents were falsified to hide the seriousness of San Bernardino's financial woes.

....  On Tuesday, the City Council voted to seek Chapter 9 bankruptcy protection, a section of federal law for municipalities facing insolvency. Interim City Manager Andrea Miller told the council that the city faced a $45.8-million budget shortfall, the equivalent of about 35% of the city’s annual budget, and would not be able make payroll this summer.   "Los Angeles Times/local, 7/12/12. "San Bernardino bankruptcy:  Criminal probe underway."   Read Article. 

 Home of  the 1st McDonald's
....  "Interim City Manager Andrea Travis-Miller, who was instrumental in discovering the degree of the city's financial problems when she and a new finance director took a close look at reports, said she had not discovered any deliberate deception. 

"I have not found that there's anything more than negligence, maybe sloppiness," she told the Los Angeles Times on Thursday.  ....  The problems stem from weak property and sales tax revenues combined with escalating pension costs and a loss of state redevelopment funds, city officials said." Bradenton Herald (Bradenton, Florida)/Associated Press/Amy Taxin and David R. Martin, 7/12/12.  "Sheriff, DA investigating bankruptcy-bound CA City."   Read Article.

Read more here:

Reference- San Bernardino.  City Cata,  Wikipedia.

Submitted by Jim Alex 

Posted by Kathy Meeh


Anonymous said...

No deliberate deception in city accounting methods, just sloppiness? Maybe a little ineptitude, procrastination and wishful thinking, too? Oh that could never happen here.

Hutch said...

From another article

"City Attorney Jim Penman alleges that for at least 13 years, former city staff falsified past budget documents"

Naw, couldn't happen here.

Anonymous said...

Locally my concern would be chronic ineptitude and the natural inclination of politicians and their flunkies to hide or spin bad news and pass the buck. Perfectly legal municipal accounting methods leave lots of room for that stuff. They're probably not crooks.

Anonymous said...

Anon 250, this was staff that may have hidden budget problems. They have more motive to paint a rosy picture then does elected officials.

Anonymous said...

Anon 521, I don't know about staff having more motivation, but they do have the means, opportunity and
greater insight into the problem.