SAN FRANCISCO — San Bernardino, Calif., officials have presented a budget plan to pay for city services during its Chapter 9 bankruptcy proceedings that appears to leave further debt service payments untouched.

The proposed plan, which was considered Tuesday during a special City Council meeting, is a strong contrast to Stockton’s approach to bankruptcy, which relies heavily on cutting bond payments.

San Bernardino adopted an emergency budget before filing for bankruptcy that included no general fund payments toward its $50 million of pension bonds, but its new budget proposal continues to make payments towards the pension obligation bonds.

Instead, San Bernardino officials plan to cut 100 positions to save an estimated $16 million to help close the $46 million budget gap that helped push the city into bankruptcy.

The “pre-pendency” plan, which will be the basis for San Bernardino’s budget during its bankruptcy case, outlines savings of more than $22 million, leaving a $16.4 million projected deficit for this fiscal year.

In order to achieve further savings, the city’s management and consultants recommended further negotiations with labor groups, and imposing reductions if necessary.

The plan is meant as a stopgap until San Bernardino, if it is allowed to proceed with its bankruptcy petition, presents to the court an outline for restructuring its obligations, one of the largest being its unfunded pension liabilities.

City officials also laid out possible future actions such as outsourcing services and closing senior centers and cemeteries.

Even though San Bernardino’s general fund has $90 million of outstanding debt obligation and additional debt obligations of $200 million inherited from its now-defunct redevelopment agency, the city made no proposal to cut debt service payments in fiscal 2013. General fund debt service would remain at $1.76 million.

The city’s $3.4 million pension obligation bond payments, budgeted separately under police and fire departments, would also be made under the budget proposal.

Stockton, in contrast, cut $12 million of debt payments in its bankruptcy budget.

San Bernardino, a city of more than 200,000 located 60 miles from Los Angeles, last month became the third city in California, following Stockton and Mammoth Lakes, to file for bankruptcy since June.

U.S. Bankruptcy Judge Meredith M. Jury has given creditors until Oct. 24 to fight San Bernardino’s bankruptcy petition, while the deadline for the city to file documents supporting its petition is Friday.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.