Because Once You Drop By Bankruptcy Court, You Don't Stop: San Bernardino On Chapter 9 Deck
10
July, 2012
Meredith
Whitney made her doomsday prediction. The nothing. Nothing. Then lots
of glib muni expert pundits gloating because the Fed, the ECB, the
BOJ, the BOE, the SNB, and of course, the central bank of Kenya, had
managed to delay the inevitable by a year. Then some more nothing.
Then suddenly Stockton, Mammoth Lakes, and now San Bernardino all
file in the span of 2 weeks.
- SAN BERNARDINO, CALIFORNIA, WEIGHING CHAPTER 9 BANKRUPTCY - BBG
- SAN BERNARDINO COUNCIL TO DISCUSS ACTION, SPOKESWOMAN SAYS - BBG
- SAN BERNARDINO SPOKESWOMAN GWENDOLYN WATERS SPOKE IN INTERVIEW - BBG
There
is a reason marginal events are oh so very important: because as
Greece showed, and now one after another broke California
municipalities are dropping like flies, one the precedent is there,
the easiest thing to do is to just hit Print on that Chapter X
petition. After all everyone else is doing it, and remember: he who
files first, files best.
San
Bernardino, California, Weighs Chapter 9 Bankruptcy
San
Bernardino may become the third California city in two weeks to file
for municipal bankruptcy protection, as it struggles with declining
tax revenue, growing employee costs and ill-timed public-works
projects.
10
July, 2012
The
City Council is to consider authorizing the city attorney to file a
Chapter 9 petition at a meeting late today, said Gwendolyn Waters, a
spokeswoman. A decision was possible tonight, though unlikely, she
said.
“It
is an option, but I don’t know if they are ready to make that
decision yet,” Waters said in a telephone interview.
A
San Bernardino bankruptcy would follow Stockton, a community of
292,000 east of San Francisco, which on June 28 became the biggest
U.S. city to file for bankruptcy. Mammoth Lakes, a mountain resort of
8,200, filed for protection from creditors on July 3 saying it can’t
afford to pay a $43 million judgment, more than twice its
general-fund spending for the year.
San
Bernardino, a city of 209,000 east of Los Angeles, faces a $45
million deficit this fiscal year, according to a June 26 budget
analysis posted on its website. The city has declared fiscal
emergencies, negotiated for concessions from employees and reduced
its workforce by 20 percent in four years, according to the report.
The
city is facing insolvency because of accounting errors, deficit
spending, pension and debt costs, and lack of revenue growth,
according to the report.
Few
Options
“Cities
are running out of options,” Michael Sweet, a partner specializing
in bankruptcy at the San Francisco office of law firm Fox Rothschild
LLP, said today in a telephone interview. “As they see pension
contribution obligations and retiree health-care costs going through
the roof, revenue is at best stable if not declining.”
San
Bernardino is the seat of San Bernardino County, which at more than
20,000 square miles, is the largest county by area in the contiguous
U.S.
San
Bernardino County and neighboring Riverside County forms a
metropolitan area that had the third-highest foreclosure rate in the
U.S. in May, according to RealtyTrac Inc., an Irvine,
California-based data provider. The area’s unemployment rate was
11.8 percent that month, compared with 8.2 percent nationwide,
according to U.S. Labor Department data.
“The
city’s reserves and discretionary funds have been depleted, and the
city faces insolvency,” San Bernardino Interim City Manager Andrea
Travis-Miller and Finance Director Jason Simpson wrote in a June 26
memo to the council. “Simply put, the city must now take
substantial action to reduce its spending and increase revenues.”
According
to its financial statements, the city and its agencies held $243
million of outstanding debt, including $48.6 million of taxable
pension-obligation bonds outstanding. The city’s debt per person
was $1,506 or $5.37 percent of personal income. San Bernardino had
$200 million of outstanding general- obligation bonds, according to
the statement.
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