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Published On: Wed, Jul 11th, 2012

San Bernardino city files for bankruptcy in California court

The city council of San Bernardino, California, voted on Tuesday to file for bankruptcy, marking the third time in recent weeks a city in the most populous U.S. state has opted to seek protection from its creditors.

Photo/RevisorWeb 2004 wikimedia commons

Bloomberg details the vote, as the council voted 4 to 2, with one abstention, last night to authorize a filing under Chapter 9 of U.S. bankruptcy law. The city of 209,000, about 65 miles (105 kilometers) east of Los Angeles, is so broke it can’t make its Aug. 15 payroll, interim City Manager Andrea Travis-Miller said.

“If the employees are not paid on Aug. 15, on Aug. 16 there will be a mass exodus of city employees,” City Attorney James Penman told the council before the vote. “People are not going to work when they don’t get paid. Most of our employees will not show up to work. That would include police, fire, refuse, everybody. The city will virtually shut down.”

Chapter 9 bankruptcy would give San Bernardino an opportunity to restructure its battered finances, city staff said during a webcast of the city council meeting.

But the council’s vote may backfire on San Bernardino in the municipal debt market, and raises concerns about local officials in California potentially looking to bankruptcy protection as an easier solution than making tough decisions about spending cuts and raising revenue, said Dick Larkin, director of credit analysis at muni bond broker-dealer HJ Sims.

“Am I troubled? You bet,” said Larkin. “I couldn’t believe how quickly this vote happened.”

Larkin noted the concerns of San Bernardino’s staff about the risk of the city not meeting its payroll in coming months may be eclipsed by concerns it could be frozen out of the muni debt market if it goes through with a bankruptcy filing.

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- Writer and Co-Founder of The Global Dispatch, Brandon has been covering news, offering commentary for years, beginning professionally in 2003 on Crazed Fanboy before expanding into other blogs and sites. Appearing on several radio shows, Brandon has hosted Dispatch Radio, written his first novel (The Rise of the Templar) and completed the three years Global University program in Ministerial Studies to be a pastor. To Contact Brandon email [email protected] ATTN: BRANDON

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  1. Finding Bankruptcy Attorneys: A Definitive Guide - The Global Dispatch says:

    […] Bankruptcy does not exactly spell the end of your life they say but it definitely makes for one of the most difficult times in one’s life. So, bankruptcy itself is quite a difficult situation— a filing blunder only compounds the stress. […]

  2. Cam says:

    I really don’t understand how a city can file for bankruptcy… I mean I do, but I don’t. It’s crazy…

  3. Power nut says:

    The rich don’t pay the bills, the middle class does.

    Nobody ever left downtown due to taxes. In fact, when you look at downtowns, it’s the middle class that fled from overpriced real estate and crime, leaving the urban poor and the rich in their penthouses.

  4. Zeyla says:

    Race to the bottom. Cities raise funds from the broad base of taxpayers. They try and get the rich to pay their fair share, the rich leave elsewhere, leaving destitution.

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