Reuters: Bankruptcy News: UPDATE 1-San Bernardino, California, considers bankruptcy

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UPDATE 1-San Bernardino, California, considers bankruptcy Jul 11th 2012, 01:57 Tue Jul 10, 2012 9:57pm EDT (Adds details, background) SAN FRANCISCO, July 10 (Reuters) - The city council of San Bernardino, California, will discuss and may act as early as Tuesday evening on a motion for the city to seek chapter 9 bankruptcy protection from its creditors at the same time as it takes up a plan to stabilize the city budget. It is unclear if the leaders of the city of about 210,000 residents approximately 65 miles (104 km) east of Los Angeles will act on the motion. They are also scheduled to take it up during a special meeting on Wednesday if needed, according to city council agenda items posted on the city's website. The council is taking up a plan by San Bernardino's interim city manager and director of finance proposing measures for the city to cut spending substantially and increase revenues. "If these measures do not achieve immediate and substantial cost savings, then the City will have to explore other alternatives to deal with its fiscal crisis, including ... consideration of AB 506 proceedings to restructure debt obligations, including unfunded liabilities, and preparation for a potential Chapter 9 filing," the two officials said in a letter to the city council. AB 506 is a state law approved after the Vallejo, California, bankruptcy in 2008 that requires financially distressed local governments to seek mediation with creditors to try to avert a bankruptcy filing. Stockton, California, failed after three months of talks with its creditors to obtain concessions to close its $26 million budget gap and the city of nearly 300,000 in the state's Central Valley last month became the most populous U.S. city to file for bankruptcy. Stockton has fallen on hard times as the result of a sharp drop in revenue after its once torrid housing market collapsed, high unemployment, too much debt and, according to city officials, generous and unsustainable benefits for city employees and retired city workers. Mammoth Lakes, California, a ski resort town of about 8,000 residents, last week filed for bankruptcy due to a nearly $43 million legal judgment against it. Like Stockton, San Bernardino has suffered from the housing crash and high unemployment, and according to the plan presented to its city council, the city "has reached a breaking point and faces the reality of deficient cash on hand to meet its contractual and debt obligations due in July 2012." "The City has declared numerous fiscal emergencies based on fiscal circumstances and has negotiated and imposed concessions of $10 million per year and has reduced the workforce by 20 percent over the past 4 years," the report said. "Yet, the City is still facing the possibility of insolvency due to a variety of issues including accounting errors, deficit spending, lack of revenue growth, and increases in pension and debt costs." The report projected San Bernardino's spending would exceed its revenue by $45 million in the current fiscal unless city leaders take action to raise revenue and cut spending. (Reporting By Jim Christie; Editing by Sandra Maler, Christopher Wilson and David Brunnstrom) Link this Share this Digg this Email Reprints

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