San Bernardino to declare fiscal emergency, move forward with bankruptcy strategy

When the San Bernardino City Council reconvenes Monday, it’s expected to declare a “fiscal emergency.” That will enable the city to file for bankruptcy protection and start mapping a course out of insolvency.

At a recent town hall hearing in his district, Councilman Rikke Van Johnson laid out San Bernardino’s rocky course to Chapter 9 bankruptcy protection.

“The goal of a Chapter 9 filing is for the municipality to emerge with a successful plan of adjustment to restructure its debt,” explained Van Johnson with the help of a PowerPoint presentation. “That might mean paying its debt over a longer period of time, reducing the amount or refinancing.”

Later Monday, says city attorney Jim Penman, the city will consider critical actions to make that possible.

“There will be two resolutions on the agenda and one will be the AB506 resolution declaring a fiscal emergency,” says Penman. That’s the trigger that’ll enable the city to file for bankruptcy protection within the next 30 days. Then comes the tough part: hammering out a restructured budget plan to present the court.

“The finance director and other city officials are working on a budget to present the bankruptcy court for reorganization,” explains Penman. “And the city staff are looking at their budgets to see what drastic cuts, additional cuts, because all departments have already taken cuts, that they can make.”

City workers agreed to a 10 percent pay cut three years ago. But those concessions expired last month, increasing the city’s payroll obligations by $10 million a year unless it can renew those concessions. The city has only about $150,000 on hand, so officials fear they won’t meet payroll next month without taking action.

The lion’s share of pay and benefits go to police officers and firefighters — sacred cows in a city with a high crime rate and powerful public safety unions. Police Chief Robert Handy says his officers have already given up a lot.

“So it’s difficult when the budget times get tough to work through that,” says Handy. “And our employees for the past three years have given up part of their salaries to try and help the budget situation and they are willing to continue to help in whatever way they can. We just need to get through some of the politics and drama to get this sorted out.”

San Bernardino also has to come up with a list of vendors and contractors it owes money to. Or rather, owed money to. Chapter 9 will give the city some protection from those creditors says city attorney Jim Penman.

“It’s a disaster for them as it is the city,” says Penman. “There’s no doubt about it. I think there are going to be many tragic casualties as a result of this city’s decision to reorganize but I think there’s no other option.”

But it doesn’t stop creditors from taking the city to court. That could lengthen the bankruptcy process, which San Bernardino hopes to merge from in less than two years.

Many who attended Councilman Rikke Van Johnson’s town hall meeting, including a woman named Veronica, said the damage runs far deeper than the city’s finances.

“Your decision put the stain on us,” she says, speaking to city leaders. “Now (we’re) all suffering from that black stain of being bankrupt, when we been cutting here and cutting there when we need to. You go and take care of your debt."

“But you left the residents and business people with a black mark!”

“Well, I’m gonna tell you this straight,” responded Van Johnson. “If we haven’t been taking care of businesses, then replace us! But this is such an apathetic community!,” said Van Johnson to a round of applause.

“If you point a finger at us, then three need to be pointed at you. We need you there all the time and not just during these crisis periods because this will pass. This will pass.”

Those at the packed two-hour town hall ended it by bowing their heads and folding their hands in prayer.

“Lead us and guide us, Lord, that this city,” went the recitation. “That everyone concerned will do the right thing for this city, for this ward, in Jesus’ name we pray, thank God almighty.”

A lengthy prayer of hope and renewal; it’s is one of the few things this city of 213,000 people can still afford.