The City of San Bernardino, which in 2012 filed for Chapter 9 bankruptcy protection, has remained in arrears to a whole host of its creditors for nearly four years. With its bankruptcy exit plan now before U.S. Bankruptcy Judge Meredith Jury, it appears the city will soon emerge from its long ongoing unenviable state, even though many of those still owed money are not happy that they will not be paid in full.
It appears that the city’s former redevelopment agency, which was closed out by an act of the California Legislature tentatively in 2011 and for good in 2012 when all such municipal entities statewide were shuttered, has beaten the city, to which it was an adjunct, in the race to get back on its feet.
Steve Dukett is with the firm Urban Futures, which has been working on the city’s revised plan of adjustment which will pay the lion’s share of the city’s creditors roughly a penny on the dollar of what they are owed, while making more substantial payments to a few select entities such as the California Public Employees Retirement System, which is in fact the city’s largest creditor.
Dukett and Urban Futures have also been working at ironing out the details relating to the former redevelopment agency’s successor agency, which was charted by the legislature when municipal redevelopment agency authority was banished statewide. The successor agency exists to ensure that those entities which loaned the former redevelopment agency money – mostly purchasers of redevelopment agency bonds – get paid back.
Dukett said that for the first time since 2012, the city in the upcoming fiscal year of 2016-17 will see more money coming into its successor agency than the demands being made against it. This is because, Dukett said, the city is now moving into a position, after having taken stock of the redevelopment agency’s assets consisting primarily of real estate holdings, of being able to sell those assets off. The proceeds of those sales will be shared by the city with a variety of other agencies that exist within the city limits and which have some form of governmental taxing authority, such as school districts and water agencies.
Dukett advised the city council, which acts as the board of directors of the successor agency, that it should not engage in any “fire sales” of those assets, but rather wait for potential buyers to make offers that will allow the city to get the best price it can for those properties.
Dukett said that some of the assets owned by the former redevelopment agency are being used for legitimate municipal purposes and as such should stay in the city’s portfolio. One of those assets, Dukett said, is the city’s current police station.