(July 13) SAN BERNARDINO—Joining the ranks of such California municipal fiscal pariahs as Vallejo, Stockton and Mammoth Lakes, San Bernardino this week became the first city in San Bernardino County history to declare its intention to file for bankruptcy protection.
After deliberating in a closed, executive session on Monday July 9 from which the public was excluded, the council met in public on July 10 and voted 4-2 with one abstention to direct city attorney James Penman to make the Chapter 9 bankruptcy filing.
The move to declare bankruptcy was a humiliating step down for San Bernardino, which in addition to being the oldest city in the county and the county seat, is, with a population of 209,924, the county’s largest city as well.
Seeking bankruptcy protection was opposed by two of the council’s members  –  councilmen Chas Kelley and Fred Shorett. Councilman John Valdivia, who was elected in November and seated on the council in March, abstained.
Referring to the vote as the most difficult decision she has been called upon to make as a council member, councilwoman Wendy McCammack said the city has worked itself into a financial position in which it cannot make expenditures on anything other than basic essential services. She was joined by councilwoman Virginia Marquez, Robert Jenkins, and Rikke Van Johnson in endorsing the filing. Penman said he would require several weeks to assemble the necessities required to make the actual filing.
Penman, in a cryptic statement he subsequently declined to clarify, alleged individuals affiliated with the city falsified the city’s financial documents in 13 out of the last 16 years. Those documents were doctored or otherwise altered to indicate the city was functioning in the black when it was actually running deficits, Penman said.
Penman did not specify which city officials had engaged in the fraud.  “I have my thoughts,” he said, “but that remains to be determined.”
He indicated the discrepancies had recently been brought to the attention of his office and that the information had been provided to investigative agencies, which he again did not specify, although from the context of his statement it appeared he was refering to the district attorney’s office and the state attorney general.
The sixteen years in question span the tenures of city managers Charles McNeely, Mark Weinberg, Fred Wilson and Shauna Clark. The lone hint Penman provided was that he was not referring to acting city manager Andrea Travis-Miller nor current finance director Jason Simpson, whom he credited with having found the discrepancies. Penman clashed with McNeely, who served as city manager from 2009 until he resigned earlier this year.
Valdivia, likewise, made an unclear reference to employees who he said had falsified budget figures. In abstaining, Valdivia said he was unwilling to cast a vote on the bankruptcy filing because he was not confident of the financial figures he had been quoted.
“The taxpayers of this city have been duped, hoodwinked and misguided for the past several years,” said Valdivia. .
Though he did not support the bankruptcy filing, Kelley said he wanted an investigative audit performed and for those who had played a role in the city’s economic demise to be held accountable.
The city’s slide toward insolvency has been ongoing for some time.  In 2008-09, the first full fiscal year after the downturn of the economy, the city had registered a $12 million shortfall by the end of the year. By the current fiscal year, 2012-13, city officials say the best figures available to them project that the city will spend a whopping $45 million more than it will bring in.
The governmental fiscal year runs from July 1 through June 30. Last month, in preparation for a news article concerning the anticipated budgets for all 24 of San Bernardino County’s incorporated cities and towns, the Sentinel   made inquiries  with all 24 city and town managers. San Bernardino alone among those municipalities was unable or unwilling to provide its projected revenues and expenditures for 2012-13. As of Tuesday, city officials said they still did not have a budget that could be publicly released.
The bankruptcy filing will leave the city council and city administration in charge of city operations and give the city, as a corporate entity, twelve to eighteen months to hold its creditors in abeyance while it attempts to straighten out its financial condition.
One undertaking that will likely follow is a major bloodletting, i.e. layoffs of municipal employees. The bankruptcy filing may also provide the city with the authority to abrogate the terms of many existing employee contracts and reopen negotiations with the bargaining units for various city employee groups. The bankruptcy filing will not, however, allow the city to renege on its pension payments to retired employees, a factor cited by Mayor Patrick Morris as a major one in the city’s deteriorating financial condition.
Travis-Miller told the council the city’s major financial burden is its payroll and steepening retirement costs, all of which is exacerbated by simultaneous declines in revenues