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San Bernardino becomes third California city to seek bankruptcy protection

By Catholic Online (NEWS CONSORTIUM)
July 12th, 2012
Catholic Online (www.catholic.org)

The California city of San Bernardino has become the third California city in recent weeks to seek bankruptcy protection. Unable to make its Aug. 15 payroll, the San Bernardino City Council is facing a $45 million deficit. The council has since authorized the city attorney to begin Chapter 9 bankruptcy proceedings immediately.

LOS ANGELES, CA (Catholic Online) - According to the San Bernardino Sun newspaper, City Attorney James Penman says that for 13 of the past 16 years, the council had been given falsified budget documents saying the city was in the black while it was running in deficit.

San Bernardino, with a population of 210,000 joins two others in California - Stockton and Mammoth Lakes - that have turned to bankruptcy in recent weeks.

The vote by the City Council this week was 4-2, with one abstention.

Councilman John Valdivia abstained as he didn't think he could trust any information he was given. "The taxpayers of this city have been duped, hoodwinked and misguided for the past several years," he said, according to newspaper reports.

Quoting city officials The Los Angeles Times reported that the fiscal crisis was a long time coming, compounded as it was by the recession and exacerbated by escalating pension costs, lucrative labor agreements, and Sacramento's raid on redevelopment funds in addition to a city reserve that dried up.

The Times reports that San Bernardino's tax revenue has dropped by as much as $16 million annually in recent years, largely because of the drop in sales and property taxes.
By filing for Chapter 9 bankruptcy protection, a section of federal law for municipalities facing insolvency, San Bernardino will be able to renegotiate labor contracts, stall payments to creditors and insulate the city from large lawsuit judgments, Penman said. Those protections will allow San Bernardino to retool its budget process and departments and wean itself back to financial health, he said.

The city faces a $46 million deficit, even after the city negotiated $10 million in concessions from employees and slashed the workforce 20 percent over the last four years.

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