San Bernardino files chapter 9 bankruptcy early

Bloomberg/Politics/Steven Church, Dawn McCarty and Michael Bathon, 8/2/12.  "San Bernardino, California, Files Chapter 9 Bankruptcy. 

File chapter 9 bankruptcy early
San Bernardino got that part right

"San Bernardino officials sped up the timing of the bankruptcy filing because they were concerned that some creditors may take legal action against the city, Mayor Patrick J. Morris said yesterday in a phone interview. Under Chapter 9, all court cases and other legal actions against the city will be halted until the bankruptcy case is over.  “All of our vital service bills will continue to be paid,” Morris said. “We are going to keep our city services running.”

San Bernardino has reduced its workforce by 20 percent in the past four years and negotiated labor cuts valued at about $10 million annually, according to a June 26 budget analysis posted on its website. One of the main problems is the high cost of the city’s union contracts, particularly for police and fire service, City Councilman Fred Shorett said in a phone interview.

The city faced insolvency because of accounting errors, deficit spending, pension and debt costs, and lack of revenue growth, according to the June 26 report. As property values plunged as part of the housing crisis, the city’s tax revenue fell also. In 2008, the city’s general fund, which is used to pay for most of its basic services, like police and fire protection, peaked with $133 million in revenue. This fiscal year, which started July 1, the fund will bring in $120 million in revenue. The preliminary budget calls for spending of $166.2 million, leaving the city short by about $46 million, according to a July 23 budget document."   Read Article.

Related Fix Pacifica reprint articles - Another CA city files chapter 9 bankruptcy, San Bernardino, 7/13/12, and San Bernardino bankruptcy, the back story, 7/17/12.

Submitted by Jim Alex 

Posted by Kathy Meeh