Officials with other Inland cities say they’re not in danger of declaring bankruptcy like San Bernardino.

BY JEFF HORSEMAN
STAFF WRITER
jhorseman@pe.com

Published: 21 July 2012 05:05 PM

It’s an obvious question after San Bernardino sought bankruptcy — is my city next?

The early answer, at least in the Inland area, is probably not. While three California cities plan to file for bankruptcy and more could follow, local officials say their finances aren’t at the breaking point.

“Bankruptcy doesn’t work on a domino basis,” said Redlands Councilman Bob Gardner.

The executive director of the League of California Cities said he doesn’t think a wave of municipal bankruptcies is coming. We’re looking at three cities out of 482,” Chris McKenzie said.

“You’re still talking about a very small percentage of the urbanized population of the state. It’s important not to overreact.”

San Bernardino’s City Council on Wednesday, July 18, voted 5-2 to declare a fiscal emergency and file for Chapter 9 bankruptcy protection. Officials said bankruptcy is the only solution to the city’s $45.8 million deficit and a cash-flow problem that jeopardizes the city’s ability to meet its Aug. 15 payroll.

Stockton announced bankruptcy plans in late June, followed days later by Mammoth Lakes. Compton is considering it, and published reports indicate eight other Golden State cities — none in Riverside or San Bernardino counties — have informed municipal bond market analysts they’re in trouble.

Nationwide, 13 cities, counties and government agencies filed for bankruptcy last year, the highest annual level in nearly two years. Seven U.S. municipalities filed this year.

For Stockton and San Bernardino, bankruptcy comes after years of sagging retail sales and lower property values dried up tax revenue. In Mammoth Lakes’ case, the ski town lacks the money to pay a $43 million court judgment levied after a development company sued, alleging Mammoth Lakes breached a contract in which the company improved an airport in exchange for the right to build a hotel.

Stockton and San Bernardino were especially hard hit by the explosion of foreclosures that followed the sub-prime mortgage crisis, said McKenzie and H.D. Palmer, a state Department of Finance spokesman. In May and June, San Bernardino had the third highest foreclosure rate among California cities with 200,000 or more residents.

As foreclosures shrank property tax income, San Bernardino closed most city offices on Fridays and cut employees’ pay 10 percent over a three-year period. The city also reduced its workforce by 20 percent in the past three years.

Inland cities have adopted a variety of cost-cutting measures. Hemet outsourced its trash collection and considered replacing its police force through a contract with the Riverside County Sheriff’s Department.

Lake Elsinore and Wildomar, which already have sheriff’s contracts, pared back the number of deputies patrolling their cities. Wildomar’s City Council meets only once a month to save money, and officials closed public parks after voters rejected a park maintenance fee.

California lawmakers’ decision to abolish redevelopment and transfer vehicle license fee revenue to the state budget adds to cities’ financial woes, McKenzie said.

“Whether or not (those actions are) going to push (cities) over the fiscal cliff is going to depend on their total fiscal picture,” he said. “But those have definitely been very damaging actions by the state.”

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