San Bernardino Council votes to file Bankruptcy

If you haven’t already heard, San Bernardino will become the third California city to file for bankruptcy this year, after officials conceded the city might not even be able to cover payroll through the summer. Faced with a budget shortfall of $45 million and city coffers that have already been drained, the San Bernardino City Council voted on Tuesday to file for bankruptcy. Andrea Travis-Miller, the interim city manager, told Council members before the vote that the city had very few options left. “I am concerned about our ability to make payroll, not only in the next 30 days but also in the next 60 to 90 days,” Ms. Travis-Miller said. “A major restructuring of this organization is needed.” Ms. Travis-Miller said it would take 30 days before city staff would be prepared to file the paperwork in bankruptcy court. Under a California law passed this year, cities must hire a third-party mediator to negotiate with employee unions and creditors before filing for Chapter 9 bankruptcy protections. However, cities can avoid this mediation process if they instead declare a fiscal emergency, which Mayor Patrick Morris said that San Bernardino planned to do. Karol K. Denniston, a partner at the law firm Schiff Hardin who helped draft the mediation legislation, said a long and difficult bankruptcy case might follow, because the city had skipped the mediation process. With 15 percent unemployment in the city, and a foreclosure rate in San Bernardino County that remains among the highest in the state, San Bernardino has been pummeled by the recession. As a result of the current City of San Bernardino’s financial hardship, many individuals will be forced into filing for either Chapter 7 or Chapter 13 Bankruptcy.

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