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Wed July 11, 2012
Surprise, San Bernardino! You're Bankrupt
Residents of San Bernardino woke up to suddenly find their city has been told "Do Not Pass Go, Do Not Collect $200." And oh, do they need money.
The city is bankrupt. Starting Aug. 15, it won't be able to pay wages or any other bills. Last night, San Bernardino acting city manager Andrea Miller warned the city council, "We have an immediate cash flow issue," notes the Los Angeles Times. Council members voted four to two with one abstention to seek bankruptcy protection.
The causes sound familiar: soaring pension costs, rising pay for municipal workers, depleted emergency funds and the Great Recession. The city, which is about 60 miles east of Los Angeles, faces a gap of about $45 million dollars, the Times reports.
Why didn't city council members see the financial cliff coming? At last night's hearing, city attorney James Penman shocked the council by telling them they'd received falsified budget documents for 13 out of the past 16 years. The San Bernardino Sun reports over several years, a variety of elected officials were given documents showing the city was in financial health when in fact, it was in deficit spending.
Penman says acting city manager Miller and her deputy found the discrepancies in reports prepared by prior city managers. Their report is here. Miller submitted an earlier report showing three quarters of city general fund spending is for employee compensation.
City officials obtained multi-million wage concessions from unionized workers and laid off 20 percent of staff over the past four years, according to KNBC but it's not enough to make up the difference. The Sun reports bankruptcy means employee wage negotiations can restart, but pension obligations will be the same.
San Bernardino follows California cities Mammoth Lakes and Stockton in filing for bankruptcy in less than a month's time.