San Bernardino Becomes Second California City to Seek Bankruptcy Protection; DA, Sheriff Looking Into 'Irregularities'

Irfan Khan / Los Angeles Times

The city council for California's 19th largest municipality has authorized the city attorney to seek Chapter 9 bankruptcy protection last week.

The vote gives City Attorney James F. Penman power to begin proceedings for Chapter 9 bankruptcy, which would free the city of much of its debt but maintain the mayor and council as decision-makers.

Penman also said at the meeting that for 13 of the last 16 years, the council had been given falsified budget documents. Those documents said the city was in the black when, in fact, it had been deficit spending, he said.

That period covers the tenure of multiple city managers and sets of elected officials, but it predates Acting City Manager Andrea Travis-Miller and Finance Director Jason Simpson, whom he said discovered the discrepancy.

Without filing for bankruptcy, the city - which has a deficit of $45 million - would likely be unable to meet its Aug. 15 payroll

In an earlier report to the council, Travis-Miller said the city has faced declining revenues and escalating retirement costs, with employee compensation accounting for about 75 percent of the city's general fund spending.

A bankruptcy filing would reopen negotiations on employee contracts but would not invalidate its pension payments, which Mayor Pat Morris and others have said are the main cause of the city's financial problem

The discrepancies in the city of San Bernardino's financial record-keeping has attracted the attention of the DA and San Bernardino County Sheriff who announced an investigation into San Bernardino's record keeping over the last few years.

The most recently available data from the Bureau of Labor Statistics indicates that the unemployment rate in the San Bernardino-Ontario-Riverside, CA are is at 11.8%.

With a population of around 210,000, San Bernardino is located about 70 miles east of Los Angeles and is the county seat of San Bernardino County- the largest county in the continental United States [larger than New Jersey, Rhode Island, Delaware and Connecticut combined- NANESB!]. The city is situated at the foot of Cajon Pass to the north and is an important transportation hub with the junction of I-10 and I-215 and a major BNSF railroad yard in city limits as well as a Union Pacific yard in nearby Colton. Route 66 once passed through the city- with San Bernardino getting a mention in the song orignally performed Nat King Cole and composed by Bobby Troup [and subsequently covered by Chuck Berry, the Rolling stones and Depeche Mode- NANESB!]. The city is also home to the first McDonalds, which is now a museum with itemd detailing the history of both Route 66 and the restaurant chain.

San Bernardino becomes the third California municipality to seek bankruptcy protection in a month. In late June, Stockton, CA became the largest city in the USA to file for Chapter 9 bankruptcy. Within days, the High Sierra town of Mammoth Lakes had also filed for bankruptcy protection after it was unable to make payments to their largest creditor.

Although local offices in California are supposedly non-partisan, the city of San Bernardino has had a Democrat mayor in office since the late 1990s. The current city council is a mix of Republicans, Democrats and some who declined to state party affiliation.