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San Bernardino, California Seeks Chapter 9 Bankruptcy

Posted By admin || 12-Jul-2012

San Bernardino, California Seeks Chapter 9 Bankruptcy

California has had other cities recently file for bankruptcy protection including Stockton and Mammoth Lakes.  Unfortunately, San Bernardino is the third city to seek Chapter 9 bankruptcy protection.  Like the other cities that filed their petitions, San Bernardino is facing a hefty deficit close to $50 million and hopes the filing will help the city stay afloat.

The city has roughly 209,000 residents. The decision to file was agreed upon by the city's council members and the vote was unexpected.  Yet, the city has been dealing with cash flow problems and feared they would not have enough on hand to cover expenses for the summer including payroll for city employees.

San Bernardino has had its share of financial woes.  When the nation was facing a recession, the city was dealing with high pension costs, an invasion of redevelopment funds by Sacramento and even tapped into the city reserve funds.  Over the last 4 years, the city has cut jobs by 20 percent in an effort to improve the deficit; this was part of a concession deal supposedly worth $10 million.

Some claim the filing is expected to heighten concerns of city residents since the financial forecast of other nearby cities in the state are unclear.  Plus, the state has seen its share of job cuts and falling tax revenue with the economy making a less than impressive recovery.  The filing will allow the city to pay necessary expenses needed to stay operational.  Insolvency is possible for San Bernardino since the city has other issues its contending with including no growth in revenue, potential accounting mistakes, limited funding to meet contractual obligations and debt costs.

http://www.latimes.com

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