San Bernardino bankruptcy hits city businesses hard

Six weeks ago, San Bernardino filed for bankruptcy.

The city government is $50-million in the hole.

Last month, the city council took an ax to the budget and chopped away jobs by the dozens. Here’s how bad it is in San Bernardino: the woman who drew up the city’s budget-cutting plan cut her own job.

What has happened to the San Bernardino city budget goes way beyond city hall. Every business that does business with the city is taking a hit – and the general business climate in San Bernardino is hardly sunny.

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But there can be surprising rewards to doing business in one of the nation’s poorest cities.

Larry Quiel’s family-run industrial sign shop has been in San Bernardino for nearly 50 years. Quiel Brothers Signs makes big industrial signs like the kind you see from the freeway towering over car dealerships.

“We have about 35 employees now. We did a fair amount of work for the city,” said Quiel.

That includes work for the city’s now defunct Economic Development Agency.

“Our invoices are in to the city for payment now," said Quiel. "And we are told that they could be frozen for 60 to 90 days, which makes us very nervous because I have vendors we have to pay along with employees."

The city owes Quiel Brothers Signs about $20,000. It owes a lot more to a lot of other companies.

Stiffing businesses does not do much for San Bernardino’s reputation – and it was not all that good to begin with.

A Claremont-McKenna study found that the cost of doing business in San Bernardino – from utility fees to business licenses - is on par with Beverly Hills.

And San Bernardino ain’t Beverly Hills.

“You still see graffiti; you still see trash; you still see weeds," said Judy Penman, who lives in San Bernardino. "If we make this city clean and safe, we are going to attract a lot more businesses."

She said San Bernardino’s boarded-up storefronts and foreclosed homes scare away business.

Penman is actually a San Bernardino booster. She sits on the school board; her husband is the city attorney; and she runs the Chamber of Commerce. But she said San Bernardino’s blight is bad - far worse than in other Inland cities, like Rancho Cucamonga.

Michael Stull directs the Inland Empire Center for Entrepreneurship at Cal State San Bernardino.

He said San Bernardino's bankruptcy hurts local businesses.

Stull said even in hard times, the Inland Empire can be a great place for an entrepreneur.

In downtown San Bernardino, the fabled Route 66 turns into E Street - “E” like “entrepreneur.” E and 14th is where one of the great entrepreneurial success stories began. That’s the very corner where McDonald’s opened its first restaurant in 1948.

“I grew up idolizing McDonald’s in the early years,” said businessman Albert Okura.

He loved the story of McDonald’s success so much that he bought the site of the original restaurant in a foreclosure sale about 15 years ago. It is now the headquarters of his Inland Empire-based chain of Juan Pollo fast-food chicken restaurants – a whopping 33 locations at last count.

“When the housing market crashed in the 1990’s, I took advantage and opened all the restaurants,” explains Okura.

At the time, San Bernardino had been hammered by the shutdown of Kaiser Steel in Fontana and the closure of Norton Air Force Base. Thousands of people lost their jobs. Real estate plunged.

“I happened to read in the newspaper one day that the McDonald’s building was for sale,” remembered Okura. "And when I read that paper, I bought the building the next day."

“When I came to San Bernardino, I could not believe the price of the property," said Okura. "It’s half of what Los Angeles is and I don’t know why. There’s no fundamental reason except buyer confidence.”

Okura is flush with confidence. He opened Juan Pollo outlets across the Inland Empire confident that if he kept costs lean, he could keep prices low – and customers would come back and order up half chickens, whole chickens, chicken tacos, chicken burritos, chicken tostadas. Even with his home base of San Bernardino in a fiscal meltdown, Okura sees opportunity.

“I get customers from the city but even if they get laid off they still have to eat. And what better place than us," Okura asked.

Leave it to the chicken guy to hatch a new idea: when the going gets tough in San Bernardino, it’s time to make money.