Some community members and officials are asking for a citywide vote on a section of San Bernardino’s governing charter that sets public safety salaries as the average of 10 similar-sized cities, saying it locks the city into too-high pay. Others say the section provides stability and fairness. (Rick Sforza/Staff photographer)
SAN BERNARDINO’S FINANCIAL CRISIS
Ryan Hagen, The (San Bernardino County) Sun
Posted: 08/01/2012 04:59:03 PM PDT
SAN BERNARDINO – The city filed for bankruptcy protection Wednesday afternoon, about two weeks before it was expected.
When the City Council voted July 18 to authorize Chapter 9 bankruptcy because of a $45.8 million deficit and severe cash- flow problems, officials said they would work as quickly as possible but expected to file in about 30 days.
Instead, the city submitted an “emergency filing” in U.S. Bankruptcy Court in Riverside on Wednesday that was spurred by an attorney’s efforts Tuesday and Wednesday in three lawsuits against the Police Department, said City Attorney James F. Penman.
The emergency filing – which can be submitted before the city prepares certain documents otherwise required in a bankruptcy filing, such as a budget plan – blocks people from suing the city and other creditors from seizing money or property, which Penman said was a serious risk in these cases.
“The decision was made about 10 to 12:30 – I don’t remember the exact minute – that we could not delay the filing any longer,” Penman said. “It’s going to result in some difficulties for us.”
The city expects many calls from creditors today, Penman said.
Mayor Pat Morris said the city had to accelerate its timeline or face the likelihood of some property being seized that the city couldn’t afford to lose.
“It was simply a filing for the purpose of avoiding any possible seizure by litigants of our liquid assets,” Morris said.
The remaining “backup” documents will be filed in mid-August, he predicted.
The filing is eight pages long, including a five-page resolution the City Council passed July 18 authorizing city staff to file for bankruptcy and declaring that without bankruptcy protection the city’s financial situation “jeopardizes the health, safety or well-being of residents.”
Officials had said earlier that they didn’t expect to meet the Aug. 15 payroll without declaring bankruptcy, but a later decision to delay some payments loosened the burden somewhat.
The city’s estimated liabilities and assets both total more than $1 billion, according to the filing. Morris said those figures were accurate.
It also says the city has between 10,001 and 25,000 creditors.
Penman said the number was about 11,000, and negotiations were complicated by the fact that they are very different types of creditors – employees, companies the city has worked with, people who’ve sued the city.
Morris said the decision to file, while expected for some time now, was emotionally difficult.
“It’s remarkably sobering to walk in that door, and to put that (document) in the clerk’s hand is a moment that gives one great pause,” he said.
Morris said the city’s outside attorneys did the filing.
The document is signed by Interim City Manager Andrea Travis-Miller and Paul Glassman, a bankruptcy attorney with Santa Monica-based Stradling Yocca Carlson and Rauth.
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According to Mayor Morris, “It was simply a filing for the purpose of avoiding any possible seizure by litigants of our liquid assets.”
I thought a “litigant” had to be a judgment creditor to seize assets. In other words, the creditor had to beat you in court and have a judgment. If so, I wonder if the city has examined the court cases it lost to attempt to avoid a repeat performance.
Perhaps the city should retain Scot Spencer as a consultant; he has lots of experience in bankruptcy court.
Mayor Morris and his chief of staff(Jim Morris) need to step down NOW! What better way to save the city any additional heartache. Between the 2 Morris’ salaries, the city can save some money and put it to better use.