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San Bernardino, Calif., Still Considering Its Options

SAN FRANCISCO – San Bernardino’s city manager said Thursday the city is close to deciding if it will proceed directly to bankruptcy and skip California’s Assembly Bill 506 mediation process with creditors.

Andrea Travis-Miller said in a statement that city staff are examining San Bernardino’s status regarding the AB 506 process that directs municipalities to hold talks with stakeholders before they can declare bankruptcy.

Travis-Miller said city staff would present an opinion to the City Council on Monday, but noted that municipalities that declare a fiscal emergency are exempt from the state requirement to participate in mediation.

The city attorney may file for bankruptcy protection in U.S. Bankruptcy Court in the next 30 days, according to the statement.

Miller and recently hired finance director Jason Simpson said in a report to the City Council that San Bernardino is facing insolvency because of accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs.

“It is important to note that in order to balance the City’s budget, deep cuts will have to be made across the board,” Travis-Miller said. 

On Tuesday, the City Council gave the city attorney the authority to file for Chapter 9 protection because it said it would otherwise be unable to pay its workers.

San Bernardino, a city of more than 211,000 located 65 miles from Los Angeles, said it faces a $46 million deficit for fiscal 2013.

According to San Bernardino’s 2010 audited financial report, its most recent, the city had $223 million of outstanding debt at the end of June 2010, of which $131 million were tax-allocation bonds.

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