According to a story from Bloomberg, the Southern California city of San Bernardino voted to file for Chapter 9 bankruptcy on Wednesday, joining the ranks of two other California cities that have sought court protection: Stockton and Mammoth Lakes.
In a FOX News report Wednesday morning, Trace Gallagher said that the city is staring down the barrel of a $46 million budget deficit and would not be able to make payroll after Aug. 15, at which point essential city services would either go unpaid or simply stop working.
“If the employees are not paid on Aug. 15, on Aug. 16 there will be a mass exodus of city employees,” City Attorney James Penman told the council before the vote, according to Bloomberg. “People are not going to work when they don’t get paid. Most of our employees will not show up to work. That would include police, fire, everybody. The city will virtually shut down.”
Another victim of the depressed housing market, San Bernardino has the third-largest municipal foreclosure rate in the country. One can also chalk this Chapter 9 filing up to unfunded pension mandates, which have led to grossly wrong budget projections, bad investments and what one disgruntled San Bernardino resident suggested amounted to 15 years of lies about the city’s fiscal condition.
A recent Reuters report said San Bernardino and Stockton are two of 8,500 local governments that have up to $2 trillion in unfunded pension mandates.
San Bernardino Councilman John Valdivia, who abstained from voting, said he did not trust the information presented at the meeting, and having only served since March believed he could not be held responsible for the money mess. “The taxpayers of this city have been duped, hoodwinked and misguided for the past several years,” Valdivia said in a statement to the San Bernardino Sun.
Gallagher also reported that the city wouldn’t be able to get out of paying police and other city workers their pension and other already owed contractual obligations; it will, however, be able to use the courts to renegotiate new contracts with employees’ unions.
Just three weeks ago, the City Council of Stockton, Calif., this week approved filing for Chapter 9 Bankruptcy on June 28, making it the largest municipality ever to do so.
Mammoth Lakes sought protection from creditors on July 2, when the Town Council saw no other way to pay for a $44 million litigation judgment and related legal fees.