BY IMRAN GHORI
STAFF WRITER
ighori@pe.com

Published: 10 July 2012 09:28 PM

The San Bernardino City Council voted Tuesday, July 10, to seek bankruptcy protection, calling it the city’s best option to solve a budget crisis in which it faces a $45 million deficit.

The 4-2 vote, with Councilmen Chas Kelley and Fred Shorett opposed, came at the end of a more than three-hour budget workshop where city officials presented a grim picture of the city’s finances. Councilman John Valdivia abstained.

City Attorney Jim Penman said it would likely take 30 days before he formally filed for bankruptcy.

City officials said they faced the possibility of being unable to make its Aug. 15 payroll for employees and pay some vendors.

Even if the city were to eliminate all departments except for police and fire, it would still face a deficit, interim City Manager Andrea Travis-Miller said.

“We have no choice but to act swiftly,” she told the council. “Reorganization is the way to get us there.”

Reorganization or Chapter 9 filing under bankruptcy law gives the city “breathing room” to restructure debts and get its finances in order, city officials said.

“It means we will get our bills paid,” Mayor Pat Morris said.

But he also called it a difficult decision and a “stain” on the city.

Councilwoman Wendy McCammack said the city cannot spend a dime on anything but basic essential services. She called the vote the hardest she’s had to make as a council member.

“Sometimes you have to fall flat on your face before you pick yourself up,” she said.

City officials had warned about the city’s finances in recent months but it wasn’t until a recent report that it was described as an immediate crisis.

A June 26 budget report to the council stated that city spending for the current fiscal year was projected to exceed revenues by more than $45 million if it were unable to find other revenues and/or cut spending. That represents 38 percent of the $166.2 million general fund budget.

The budget report stated that the city has seen its annual general fund revenues drop by $11.69 million in the past five years due to declines in sales, property and utility taxes while its reserve funds have been depleted.

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