Citing $1 Billion In Debt, San Bernardino, Calif., Files For Chapter 9 Bankruptcy

RIVERSIDE, Calif. - (Mealey's) The City of San Bernardino, Calif., filed its much-anticipated petition for Chapter 9 bankruptcy in the evening of August 1 in the U.S. Bankruptcy Court for the Central District of California, citing more than $1 billion in debt (In Re:  City of San Bernardino, California, No. 12-28006, Chapter 9, C.D. Calif. Bkcy.).

The San Bernardino City Council voted July 24 to adopt an emergency three-month fiscal plan that would suspend debt payments, freeze hiring for jobs that were still vacant and stop payments into the retiree health fund while the city developed a bankruptcy plan.

Fiscal Crisis

The city had declared a financial crisis on July 18 when it became apparent that it no longer had cash reserves and the city projected that its spending in the fiscal year, which began July 1, would exceed revenue by $45 million.

San Bernardino, which has 211,000 residents, is the third California municipality to file for Chapter 9 bankruptcy since June 28.  The cities of Stockton and Mammoth Lakes also have filed.


At the time the City Council declared the fiscal emergency, it said the financial burden on the city was the result of a decline in revenues related to a drop in property values.  Specifically, the city said it has lost between $10 million and $16 million in annual revenue as a result of the worsening economy.

Moreover, despite a 20 percent reduction in the city's workforce over the last four years, San Bernardino did not have enough money on hand to meet its obligations, the City Council said, referring to a report issued by the city attorney.

The city is represented by Paul R. Glassman of Stradling Yocca Carlson & Rauth in Sacramento, Calif.

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