San Bernardino, California
On July 10, 2012, the City Council of San Bernardino decided to seek protection and file Chapter 9, Title 11, United States Code protection. It is the third city in California to file for bankruptcy. The city is facing a $46 million deficit and is facing major deficits for the next five years. The city said it was unable to pay bills due to pension costs, the recession, lucrative labor agreements and the loss of Sacramento redevelopment funds. The other two cities to declare bankruptcy are Stockton and Mammoth Lakes.
Law enforcement officials are investigating possible criminal activity within departments of the city government. There are allegations that financial documents were falsified to make the financial situation for the city not appear as dire as it was.
Since declaring bankruptcy in August, the city now owes CalPERs $6 million in payments and is attempting to renegotiate it's debt. The total unfunded pension obligations for the city are $143.3 million, and CalPERs is objecting to the bankruptcy protection claims.
The city is also adopting a "pendency plan" hoping to close its $5.8 million general fund deficit, which barely lets the city make payroll.
CalPERs is seeking to sue bankrupt San Bernardino over missed pension payments. San Bernardino can’t use U.S. bankruptcy law to justify its failure to make at least $5 million in payments, Calpers, the biggest U.S. public-employee pension fund, said in court papers filed Nov. 27. Calpers is arguing that pension contributions must be made ahead of payments to other creditors because they are so-called statutory liens, or debts that state law requires to be paid. Bondholders and other creditors that oppose Calpers argue that pension debt is a contractual obligation like any other.
A group of bondholders and bond insurers filed a 114-page objection to arguments by CalPERS that it should enjoy its historical primacy as a municipal bankruptcy creditor. The bondholders and bond insurers argue that under federal law, Calpers should be treated as any other creditor and its claims to supremacy under state law are void.
Among the companies objecting is National Public Finance Guarantee Corp., a bond insurance company. National Public is also fighting with CalPERS over the Stockton bankruptcy, objecting to the city's insistence on paying its pension obligations while other creditors lose millions.
The city of San Bernardino won an important victory in its request for bankruptcy protection Dec. 21, when a judge denied CalPERS’ attempt to force payment of unpaid pension obligations through state court. Although agreeing the city was in violation of the law, the judge said she also had to balance other more immediate interests, such as what impact it might have if she allowed CalPERS to seek collection from the city. She said the city still needs time to get its finances in order, which is the whole purpose of bankruptcy protection. But she told city officials they need to have an end game for their plan of adjustment that will be submitted to the court, spelling out how the city will repay creditors.
The unions representing San Bernardino's police and firefighters have agreed to nonbinding mediation with the city as part of its bankruptcy process, after months of stalled contract negotiations.
In its new budget San Bernardino officials said they hope to resume paying into Calpers, after almost a year of non-payment since the city filed for bankruptcy. San Bernardino halted its $1.2 million, bimonthly employer contributions to the California Public Employees' Retirement System when it declared bankruptcy on Aug. 1, 2012.
Under a new city budget, San Bernardino will resume paying its $1.2 million bimonthly payment into CalPERS July 1, 2013. The city will defer payments on bonds.
2014 Pacific Research Institute report
In January 2014, the Pacific Research Institute, a California-based public policy organization, issued a report on the largest Chapter 9 municipal bankruptcies across the United States as well as other municipalities facing financial straits. The municipalities included in the report were San Jose, Detroit, MI, New York City, Harrisburg, PA, Stockton, CA, and San Jose, CA. According to the report, a combination of the state's housing bust, a decline in property tax revenues, weaker economic activity, and declining state revenues pushed the city into bankruptcy. San Bernardino faced a $46 million budget deficit with few resources to fall back on. The city's unfunded pension liability included $143 million, as well as $17 million owed to the state's public employees' retirement system (CALPERS).
According to the city’s most recent Comprehensive Annual Financial Report, the city’s various funds had $313.6 million in Revenues, $298.5 million in expenditures, $1,113.3 million in total assets, $449.6 million in total liabilities, and $181.0 million in cash and investments.
The City of San Bernardino is a charter city, a form of government under California that allows limited home-rule, in that it can pass its own laws not in conflict with state law, such as when state law is silent, or expressly allows municipal regulations of areas of local concern. San Bernardino became a charter city in 1905, the most current charter was passed in 2004.
The City of San Bernardino has a full-time, elected mayor, a city manager, an elected City Attorney, City Clerk, and City Treasurer, and seven council positions elected in a ward system. The charter also created the San Bernardino City Unified School District, a legally separate agency, and the Board of Water Commissioners, a semi-autonomous, but legally indistinct commission, and a Board of Library Trustees. The City Manager is responsible for all department heads, except for the fire and police chiefs. Previously, the San Bernardino Municipal Code recognized a City Administrator.
When the City originally adopted a ward system, there were five wards. In the 1960s, the Council was expanded to seven wards. The boundaries are adjusted with each federal census as required by federal constitutional law. The current council is:
First Ward: Virginia Marquez; Second Ward: Robert Jenkins; Third Ward: Tobin Brinker; Fourth Ward: Fred Shorrett Fifth Ward: Chas (not Charles) Kelley; Sixth Ward: Rikke Van Johnson; Seventh Ward: Wendy McCammack;
The Mayor is Patrick J. Morris
As per California law, all city positions are nonpartisan. Bob Holcomb (1922–2010) is the longest serving Mayor of San Bernardino to date, holding the office from 1971 until 1985 and again from 1989 to 1993.
San Bernardino's legal community has two centers: downtown and Hospitality Lane. Criminal, family, and government lawyers are centered downtown, while local civil firms and outposts of state and national firms, corporate, and insurance defense firms, are located along Hospitality Lane. The Government of Mexico has a consulate in downtown San Bernardino on the southeast corner of Third Street and "D" Street. Citizens of Mexico can obtain a Matrícula Consular which many governments and businesses use in lieu of U.S.
Currently, there will be two ballot measures on the ballot in November addressing the salaries of elected officials in the county. The San Bernardino County Board of Supervisors approved a ballot measure that would keep their salaries and benefits in line with counties of similar size and population. An opposing measure has been proposed by the county's two largest labor unions, the San Bernardino County Safety Employees Benefit Association and the San Bernardino Public Employees Association, which proposes to reduce supervisors' pay and benefits to $60,000.
Services are being cut in order to pay for unusually high pensions in each of the California cities that have declared bankruptcy. Two former police chiefs are collecting pensions above $200,000 annually. Keith Kilmer receives $216,581, though he too retired early and currently working at another job. His predecessor, Michael Billdt receives $205,014.
San Bernardino has lowered its retirement age for public safety workers from 55 to 50. In 2011, 13 percent of they city's budget went to funding pensions, a 9 percent increase from 2007.
Part of San Bernardino's bankruptcy plan is to renegotiate its debt with CalPERS. The city has already halted payments to Calpers since it declared bankruptcy on August 1, and owes more than $6 million in dues to the fund. The city, 60 miles east of Los Angeles, lists Calpers as its biggest creditor, with unfunded pension obligations totaling $143.3 million. Calpers says it uses a different calculation method and pegs the debt at $319.5 million.
According to the plan, San Bernardino wouldn't resume payments to CalPERS until the new fiscal year beginning next July 1. The city also wants to renegotiate future payments in order to yield a saving of $1.3 million a year.
The judge handling San Bernardino's bankruptcy likely will not lift a stay so CalPERS can sue over missed pension payments, several attorneys studying the legal battle predicted. That could save expensive legal fees for the city, which plans to resume payments in fiscal year 2013-14 and repay the rest later because it says paying earlier would ruin the city.
As a charter city, San Bernardino may make and enforce its own laws not in conflict with the State's laws. These rules have been codified as the San Bernardino Municipal Code. Violations of the San Bernardino Municipal Code, punishable as a misdemeanor or infraction (or both) are prosecuted by the City Attorney's Office in the San Bernardino Superior Court. The City also has two administrative processes for violations of the San Bernardino Municipal Code, including adopted codes such as the California Building Code and the California Fire Code. One is an administrative citation system, similar to a parking ticket, with a pay or contest procedure. The other is an administrative hearing process, generally used for multiple code violations by the Code Enforcement Department.
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- "3rd Calif. city to file for bankruptcy in 1 month". CBS News. http://www.cbsnews.com/8301-201_162-57469953/3rd-calif-city-to-file-for-bankruptcy-in-1-month/. Retrieved on 11 July 2012.
- LA Times, San Bernardino seeks bankruptcy protection, July 10, 2012
- LA Times, San Bernardino bankruptcy: Criminal probe underway, July 12, 2012
- Yahoo News, Bankrupt San Bernardino seeks renegotiation of Calpers debt, Nov. 20, 2012
- Business Week, Calpers Seeks to Sue San Bernardino Over Pension Payments, Nov. 29, 2012
- Reuters, Bondholders take fight to Calpers in bankrupt San Bernardino, Dec. 11, 2012
- Sacramento Bee, Bondholders object to CalPERS' plans to sue San Bernardino, Dec. 10, 2012
- Press Enterprise, SAN BERNARDINO: Judge denies CalPERS request to force city payment, Dec. 21, 2012
- San Bernardino Sun, San Bernardino police, fire unions enter mediation, Jan. 20, 2013
- Reuters, San Bernardino says it hopes to resume paying Calpers, April 10, 2013
- Reuters, Bankrupt California city to resume paying pension fund, but not bondholders, April 12, 2013
- Pacific Research Institute, "Going Broke One City at a Time: Municipal Bankruptcies in America," January 10, 2014
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- Koren, James Rufus (November 29, 2010). "Ex-mayor of San Bernardino dies at 88", The San Bernardino Sun. Retrieved on December 11, 2010.
- Edwards, Andrew (December 9, 2010). "Former SB mayor W.R. "Bob" Holcomb laid to rest", Contra Costa Times. Retrieved on December 12, 2010.
- The Sun, San Bernardino County supervisors approve ballot measure that would keep salaries, benefits, July 24, 2012
- RT, Bankrupt California cities slash public services to fund six-figure pensions, Aug. 4, 2012
- Reuters, Bankrupt San Bernardino seeks renegotiation of Calpers debt, Nov. 20, 2012
- Sacramento Bee, San Bernardino wants to delay payments to CalPERS, Nov. 21, 2012
- San Bernardino Sun, CalPERS likely to lose next court battle, San Bernardino bankruptcy observers predict, Dec. 4, 2012
- State-Level Lobbying and Taxpayers: How Much Do We Really Know?, Pacific Research Institute
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