San Bernardino Officials Requests Chapter 9 Protection

Just three weeks after lawmakers in San Bernardino, CA voted to begin preparing a potential municipal bankruptcy filing, like two other state municipalities did before it, city officials have official requested Chapter 9 protection. It came several weeks ahead of expectations, largely on thinly veiled threats of lawsuits from creditors.

San Bernardino, like many U.S. cities struggling with debt,  is be tied to a lot of contracts with current and retired public workers, especially for pension and health care costs, that are zapping its budget. A previous news release noted “systemic” financial problems that would carry throughout 2012 and beyond and that “clearly, reductions to the expenditures side of the budget are not going to product the level of savings that will be needed to balance the budget.” The budget shortfall was estimated at $46 million.

California had implemented a state law requiring a 90-day mediation period designed to bring municipalities and their creditors to the negotiating table before struggling cities can file. While it has likely slowed the pace of filings, as intended, votes and discussions to pursue the eventually bankruptcy option have continued throughout the state.

-Brian Shappell, CBA, NACM staff writer

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